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Skilled-Unskilled Wage Inequality, Growth of Skilled Labour and Development Policies

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  • Gupta Manash Ranjan

    (Economic Research Unit, Indian Statistical Institute, 203, B. T. Road, Kolkata – 700108)

  • Dutta Priya Brata

    () (Economics Department, Serampore College, Serampore, Hooghly, Pin-712201. West Bengal, India)

Abstract

This paper develops a small open economy model with three sectors and four factors – land, unskilled labour, skilled labour and capital. Two of these three sectors produce final traded goods of which one sector produces an agricultural product using land and unskilled labour and another sector produces a manufacturing product using skilled labour and capital. The third sector, called education sector produces a service using skilled labour and capital as inputs; and this service transforms unskilled workers into skilled workers. The current output is added to the existing stock of skilled labour at the next point of time. The paper first analyses various comparative static effects on skilled-unskilled relative wage in the static model where no factor endowment changes over time. Next, it analyses the long-run equilibrium properties in the dynamic model with intertemporal accumulation of skilled labour; and derives various comparative steady state effects on skilled unskilled relative wage. Comparative steady-state effects appear to be stronger than the corresponding comparative static effects.

Suggested Citation

  • Gupta Manash Ranjan & Dutta Priya Brata, 2014. "Skilled-Unskilled Wage Inequality, Growth of Skilled Labour and Development Policies," Journal of Globalization and Development, De Gruyter, vol. 5(1), pages 1-26, June.
  • Handle: RePEc:bpj:globdv:v:5:y:2014:i:1:p:26:n:2
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    References listed on IDEAS

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    Cited by:

    1. Alaka Shree Prasad & Biswajit Mandal, 2019. "Time zone difference, skill formation and corrupt informal sector: the role of virtual trade," Indian Economic Review, Springer, vol. 54(2), pages 261-290, December.

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