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International Factor Mobility, Production Cost Components, and Wage Inequality

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  • Pi Jiancai
  • Zhou Yu

    (Department of Economics, Nanjing University, 22 Hankou Road, Nanjing 210093, P. R. China)

Abstract

The present paper establishes a two-sector monopolistic competition model to investigate how international factor mobility influences the skilled–unskilled wage inequality when the monopolistically competitive sector producing final goods is characterized by various types of production cost functions. We discuss three types of production cost functions of the monopolistically competitive sector. Different types of production cost functions have different production factor components of variable and fixed costs. We find that differences in production cost components of the monopolistically competitive sector matter for the impacts of international factor mobility on the skilled–unskilled wage inequality.

Suggested Citation

  • Pi Jiancai & Zhou Yu, 2015. "International Factor Mobility, Production Cost Components, and Wage Inequality," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(2), pages 503-522, April.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:2:p:503-522:n:8
    DOI: 10.1515/bejeap-2014-0006
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    4. Jiancai Pi & Xiangyu Huang, 2021. "Product Variety and Wage Inequality," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 135-151, May.

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