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Wage inequality and welfare in developing countries: Privatization and reforms in the short and long run

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  • Chao, Chi-Chur
  • Nabin, Munirul
  • Nguyen, Xuan
  • Sgro, Pasquale M.

Abstract

The impacts of privatization on wage inequality and welfare are considered for developing countries. In the short run, privatization can narrow wage inequality but reduce output of public firms. However, the favorable effect of privatization on lowering wage inequality vanishes in the long run due to the excessive entry of public firms. Thus, a policy recommendation for privatization would be: to avoid rising wage inequality, entry regulation of public firms should be imposed in the short run, and to mitigate the output contraction, complementary structural changes or policy reforms are needed in the transitional period of privatization.

Suggested Citation

  • Chao, Chi-Chur & Nabin, Munirul & Nguyen, Xuan & Sgro, Pasquale M., 2016. "Wage inequality and welfare in developing countries: Privatization and reforms in the short and long run," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 474-483.
    • Handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:474-483
    DOI: 10.1016/j.iref.2015.10.023
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    2. Pi, Jiancai & Zhang, Pengqing, 2018. "Privatization and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 594-603.
    3. Dianshuang Wang & Xiaochun Li, 2020. "Privatization in Vertically Related Markets: Insights from a General Equilibrium Approach," Hacienda Pública Española / Review of Public Economics, IEF, vol. 234(3), pages 3-21, September.
    4. Dianshuang Wang, 2019. "Manufacturing and agricultural pollution, private mitigation and wage inequality in the presence of pollution externalities," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(2), pages 51-58.
    5. Ee, Mong Shan & Beladi, Hamid & Chao, Chi-Chur, 2024. "Corporate structure, partial privatization, and wage inequality: Evidence from China's split share structure reform," Emerging Markets Review, Elsevier, vol. 61(C).
    6. Pi Jiancai & Yin Jun, 2016. "Privatization, Unemployment, and Welfare in the Harris-Todaro Model with a Mixed Duopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-12, October.
    7. Beatriz Cuadrado-Ballesteros & Noemí Peña-Miguel, 2018. "The Socioeconomic Consequences of Privatization: An Empirical Analysis for Europe," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(1), pages 163-183, August.
    8. Dianshuang Wang & Xiaochun Li & Zixin Hu & Run Yuan, 2023. "Labor market distortion and its impact on wage inequality in the modernization of small‐scale agriculture," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 988-1007, December.
    9. Yunyun Wu & Xiaochun Li, 2020. "Rural-urban migrants' remittances and wage inequality: Evidence from China," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(3), pages 129-139.
    10. Xiaochun Li & Tiantian Jia, 2022. "Partial privatization, producer services, and unemployment in developing countries," Review of Development Economics, Wiley Blackwell, vol. 26(1), pages 423-441, February.
    11. Tran, Tuyen Quang & Thi Nguyen, Hoai Thu & Hoang, Quang Ngoc & Van Nguyen, Dinh, 2022. "The influence of contextual and household factors on multidimensional poverty in rural Vietnam: A multilevel regression analysis," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 390-403.
    12. Sugata Marjit & Saibal Kar, 2019. "International Capital Flows, Land Conversion and Wage Inequality in Poor Countries," Open Economies Review, Springer, vol. 30(5), pages 933-945, November.
    13. Nabin, Munirul H. & Sgro, Pasquale M. & Nguyen, Xuan & Chao, Chi Chur, 2016. "State-owned enterprises, competition and product quality," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 200-209.
    14. Dai, Yunhao & Kong, Dongmin & Xu, Jin, 2017. "Does fairness breed efficiency? Pay gap and firm productivity in China," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 406-422.

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    More about this item

    Keywords

    Wage inequality; Welfare; Privatization; Developing economies;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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