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The impacts of capital market distortion on wage inequality, urban unemployment, and welfare in developing countries

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  • Pi, Jiancai
  • Chen, Xuyang

Abstract

This paper employs the general equilibrium approach to investigate how the change of rural–urban capital market distortion influences skilled–unskilled wage inequality and urban unemployment in developing countries. Our basic model shows that a decrease in capital market distortion will reduce the wage inequality and the urban unemployment rate. Our extended model confirms the main results of our basic model. Furthermore, this paper also analyzes the effect of capital market distortion on social welfare, and finds that an alleviation of capital market distortion will generate a welfare gain in both basic and extended models.

Suggested Citation

  • Pi, Jiancai & Chen, Xuyang, 2016. "The impacts of capital market distortion on wage inequality, urban unemployment, and welfare in developing countries," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 103-115.
  • Handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:103-115
    DOI: 10.1016/j.iref.2015.10.045
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    1. repec:eee:reveco:v:56:y:2018:i:c:p:347-362 is not listed on IDEAS
    2. repec:eee:reveco:v:54:y:2018:i:c:p:165-177 is not listed on IDEAS
    3. Pi, Jiancai & Zhang, Pengqing, 2016. "Hukou system reforms and skilled-unskilled wage inequality in China," China Economic Review, Elsevier, vol. 41(C), pages 90-103.
    4. Pi Jiancai & Ge Yang & Yin Jun, 2017. "The Impacts of Rural Property Rights on Urban Unemployment, Wage Inequality, and Welfare in Developing Countries," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-15, February.
    5. repec:eee:reveco:v:49:y:2017:i:c:p:582-595 is not listed on IDEAS

    More about this item

    Keywords

    Capital market distortion; Wage inequality; Urban unemployment; Social welfare; General equilibrium approach;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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