IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Institutional quality and skilled–unskilled wage inequality

  • Pi, Jiancai
  • Zhou, Yu
Registered author(s):

    This paper establishes two-sector general equilibrium models in the presence of unproductive activities to investigate how an improvement of the institutional quality influences the skilled–unskilled wage inequality. We find that an improvement of the institutional quality will affect the interest rate, and then the interest rate combining with the capital intensity will generate an impact on the skilled–unskilled wage inequality. Specifically, both the interest rate and comparisons of the capital–labor relative distributive shares between two sectors play an important role in determining the skilled–unskilled wage gap in an economy featured with unproductive activities. The above results are robust even when we extend the basic theoretical model in several different ways.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999313003003
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 35 (2013)
    Issue (Month): C ()
    Pages: 356-363

    as
    in new window

    Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:356-363
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1995. "A Comparison of Changes in the Structure of Wages in Four OECD Countries," NBER Chapters, in: Differences and Changes in Wage Structures, pages 25-66 National Bureau of Economic Research, Inc.
    2. Gupta, Manash Ranjan & Dutta, Priya Brata, 2010. "Skilled-unskilled wage inequality, nontraded good and endogenous supply of skilled labour: A theoretical analysis," Economic Modelling, Elsevier, vol. 27(5), pages 923-934, September.
    3. Sarbajit Chaudhuri & Shigemi Yabuuchi, 2005. "Economic Liberalization And Wage Inequality In The Presence Of Labour Market Imperfection," International Trade 0510008, EconWPA.
    4. Kwabena Gyimah-Brempong, 2002. "Corruption, economic growth, and income inequality in Africa," Economics of Governance, Springer, vol. 3(3), pages 183-209, November.
    5. Antonio Andres & Carlyn Ramlogan-Dobson, 2011. "Is Corruption Really Bad for Inequality? Evidence from Latin America," Journal of Development Studies, Taylor & Francis Journals, vol. 47(7), pages 959-976.
    6. Sugata Marjit & Hamid Beladi & Avik Chakrabarti, 2004. "Trade and Wage Inequality in Developing Countries," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 295-303, April.
    7. Ravi Batra & Hamid Beladi, 2010. "Outsourcing and the Heckscher-Ohlin Model," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 277-288, 05.
    8. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2011. "North–South Outsourcing, Immigration, and Skilled Wages: Through the Lens of Incomplete Contracts," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 417-428, 08.
    9. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    10. Deardorff, Alan V., 2005. "A trade theorist's take on skilled-labor outsourcing," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 259-271.
    11. Marjit, Sugata & Ghosh, Sudeep & Biswas, Amit, 2007. "Informality, corruption and trade reform," European Journal of Political Economy, Elsevier, vol. 23(3), pages 777-789, September.
    12. Yabuuchi, Shigemi & Chaudhuri, Sarbajit, 2007. "International migration of labour and skilled-unskilled wage inequality in a developing economy," Economic Modelling, Elsevier, vol. 24(1), pages 128-137, January.
    13. Rashmi Banga, 2005. "Liberalisation and wage inequality in India," Indian Council for Research on International Economic Relations, New Delhi Working Papers 156, Indian Council for Research on International Economic Relations, New Delhi, India.
    14. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    15. Moore, Michael O. & Suranovic, Steven M., 1992. "Lobbying vs. administered protection : Endogenous industry choice and national welfare," Journal of International Economics, Elsevier, vol. 32(3-4), pages 289-303, May.
    16. Reza Oladi & John Gilbert & Hamid Beladi, 2008. "Foreign Direct Investment, Non-traded Goods and Real Wages," Working Papers 200804, Utah State University, Department of Economics and Finance.
    17. Chakrabarti, Avik & Mitra, Rajarshi, 2010. "Skilled-unskilled wage inequality and offshore outsourcing with asymmetric adjustment costs," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 340-345, April.
    18. Bag, Parimal Kanti, 1997. "Controlling Corruption in Hierarchies," Journal of Comparative Economics, Elsevier, vol. 25(3), pages 322-344, December.
    19. Wang, Ming-cheng & Fang, Chen-ray & Huang, Li-hsuan, 2009. "International knowledge spillovers and wage inequality in developing countries," Economic Modelling, Elsevier, vol. 26(6), pages 1208-1214, November.
    20. Marjit, Sugata & Kar, Saibal, 2005. "Emigration and wage inequality," Economics Letters, Elsevier, vol. 88(1), pages 141-145, July.
    21. Fang, Chen-ray & Huang, Li-hsuan & Wang, Ming-cheng, 2008. "Technology spillover and wage inequality," Economic Modelling, Elsevier, vol. 25(1), pages 137-147, January.
    22. Mandal, Biswajit & Marjit, Sugata, 2010. "Corruption and wage inequality?," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 166-172, January.
    23. Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
    24. Pi, Jiancai & Zhou, Yu & Yin, Jun, 2013. "International factor mobility, monopolistic competition, and wage inequality," Economic Modelling, Elsevier, vol. 33(C), pages 326-332.
    25. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
    26. Mandal, Biswajit & Marjit, Sugata, 2013. "Trade reform, intermediation and corruption," Economic Modelling, Elsevier, vol. 33(C), pages 741-746.
    27. Laixun Zhao, 1996. "The Complementarity Between Endogenous Protection And Direct Foreign Investment," Economics and Politics, Wiley Blackwell, vol. 8(1), pages 61-72, 03.
    28. Zhang, Jingjing, 2013. "Factor mobility and skilled–unskilled wage inequality in the presence of internationally traded product varieties," Economic Modelling, Elsevier, vol. 30(C), pages 579-585.
    29. Anwar, Sajid, 2006. "Factor mobility and wage inequality in the presence of specialisation-based external economies," Economics Letters, Elsevier, vol. 93(1), pages 88-93, October.
    30. Hamid Beladi & Sarbajit Chaudhuri & Shigemi Yabuuchi, 2008. "Can International Factor Mobility Reduce Wage Inequality in a Dual Economy?," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 893-903, November.
    31. Bose, Gautam, 2004. "Bureaucratic delays and bribe-taking," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 313-320, July.
    32. Rashmi Banga, 2007. "Liberalisation and Wage Inequality In India," Working Papers id:805, eSocialSciences.
    33. Robert Z. Lawrence, 1994. "Trade, Multinationals, & Labor," NBER Working Papers 4836, National Bureau of Economic Research, Inc.
    34. Anwar, Sajid, 2013. "Outsourcing and the skilled–unskilled wage gap," Economics Letters, Elsevier, vol. 118(2), pages 347-350.
    35. Anwar, Sajid & Rice, John, 2009. "Labour mobility and wage inequality in the presence of endogenous foreign investment," Economic Modelling, Elsevier, vol. 26(6), pages 1135-1139, November.
    36. Mark P. Moore & Priya Ranjan, 2005. "Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality," Economic Journal, Royal Economic Society, vol. 115(503), pages 391-422, 04.
    37. George J. Borjas & Valerie A. Ramey, 1993. "Foreign Competition, Market Power and Wage Inequality: Theory and Evidence," NBER Working Papers 4556, National Bureau of Economic Research, Inc.
    38. Bakhtiari, Sasan, 2012. "Offshoring, wages and the growing skill gap: Advocating offshoring without sectoral reallocation," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 46-58.
    39. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
    40. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
    41. Pi, Jiancai & Zhou, Yu, 2012. "Public infrastructure provision and skilled–unskilled wage inequality in developing countries," Labour Economics, Elsevier, vol. 19(6), pages 881-887.
    42. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, June.
    43. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-81, August.
    44. Zhang, Jingjing, 2012. "Inflow of labour, producer services and wage inequality," Economics Letters, Elsevier, vol. 117(3), pages 600-603.
    45. Sugata Marjit & Rajat Acharyya, 2006. "Trade Liberalization, Skill-linked Intermediate Production and the Two-sided Wage Gap," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(3), pages 203-217.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:356-363. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.