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Rural Public Investment and Wage Inequality Under Small-Scale Agriculture Modernization

In: Wage Inequality from Agricultural Modernization

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  • Dianshuang Wang

    (Anhui University of Finance and Economics)

Abstract

Increasing rural public investment is crucial for sustainable rural development and can be an effective approach for reducing inequality. However, wage inequality has increased in some developing countries (e.g., China) after increasing fiscal support. This chapter explores how rural public investment influences skilled-unskilled wage inequality by incorporating agricultural modernization in small-scale agriculture. Agricultural modernization refers to introducing modern non-agricultural intermediate inputs in agriculture. Owing to the small scale of agriculture, an intermediate sector, the agricultural producer service sector, is required to facilitate this process. This chapter establishes a three-sector general equilibrium model with a two-layer vertical production structure and investigate the effects of increased public investment in rural areas on the wage inequality between skilled and unskilled labor. The theoretical results show that while more rural public investment raises the wages of both skilled and unskilled labor, it also increases wage inequality. Overall, this chapter explains why inequality widens as rural public investment increases.

Suggested Citation

  • Dianshuang Wang, 2025. "Rural Public Investment and Wage Inequality Under Small-Scale Agriculture Modernization," Springer Books, in: Wage Inequality from Agricultural Modernization, chapter 0, pages 123-144, Springer.
    • Handle: RePEc:spr:sprchp:978-981-96-6851-9_6
    DOI: 10.1007/978-981-96-6851-9_6
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