Grey power and public budgets: Family altruism helps children, but not elderly
International trade may influence income distribution. This study takes as a starting point the puzzling development of relative wages between skilled and unskilled labor in South Africa. Wage inequality decreased during the sanctions period and increased with trade liberalization post Apartheid, contrary to the standard trade theory prediction for an economy with comparative advantage in unskilled labor. We calibrate a Ramsey growth model for South Africa to clarify and quantify the distributive effects of trade barriers, and offer an understanding of the South African experience based on the interaction between openness and skill biased technical change. The dependence on foreign technology increases with openness and gives higher degree of skill bias, which may explain the observed relative wage path. Our model calibration is an alternative to econometric studies separating between trade and technology effects. A counterfactual analysis shows that without sanctions and protectionism during the 1980s the skilled-unskilled wage gap is about 13% larger on average. The quantitative results imply that an increase in trade as share of GDP of 10% points generates an increase in the wage gap of 6.6%. The analysis reveals a tradeoff between growth and distribution.
|Date of creation:||04 Mar 2009|
|Date of revision:|
|Contact details of provider:|| Postal: 7491 Trondheim|
Phone: 73 59 19 40
Fax: 73 59 69 54
Web page: http://www.svt.ntnu.no/iso/WP/wp.htm
More information through EDIRC
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.:
- Alejandra Cattaneo & Stefan C. Wolter, 2007.
"Are the Elderly a Threat to Educational Expenditures?,"
CESifo Working Paper Series
2089, CESifo Group Munich.
- Cattaneo, M. Alejandra & Wolter, Stefan C., 2009. "Are the elderly a threat to educational expenditures?," European Journal of Political Economy, Elsevier, vol. 25(2), pages 225-236, June.
- Alejandra Cattaneo & Stefan C. Wolter, 2007. "Are The Elderly A Threat To Educational Expenditures?," Economics of Education Working Paper Series 0003, University of Zurich, Institute for Strategy and Business Economics (ISU).
- Ueli Grob & Stefan C. Wolter, 2007.
"Demographic Change and Public Education Spending: A Conflict between Young and Old?,"
Taylor & Francis Journals, vol. 15(3), pages 277-292.
- Ueli Grob & Stefan C. Wolter, 2005. "Demographic Change and Public Education Spending: A Conflict between Young and Old?," CESifo Working Paper Series 1555, CESifo Group Munich.
- Ueli Grob & Stefan C. Wolter, 2006. "Demographic Change and Public Education Spending a Conflict between Young and Old?," Economics of Education Working Paper Series 0008, University of Zurich, Institute for Strategy and Business Economics (ISU).
- Kathleen McGarry, 2000. "Testing Parental Altruism: Implications of a Dynamic Model," NBER Working Papers 7593, National Bureau of Economic Research, Inc.
- Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
- Harris, Amy Rehder & Evans, William N. & Schwab, Robert M., 2001. "Education spending in an aging America," Journal of Public Economics, Elsevier, vol. 81(3), pages 449-472, September.
- James M. Poterba, 1996.
"Demographic Structure and the Political Economy of Public Education,"
NBER Working Papers
5677, National Bureau of Economic Research, Inc.
- James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
- Ladd, Helen F. & Murray, Sheila E., 2001. "Intergenerational conflict reconsidered: county demographic structure and the demand for public education," Economics of Education Review, Elsevier, vol. 20(4), pages 343-357, August.
- Borge, Lars-Erik & Rattso, Jorn & Sorensen, Rune, 1995. "Local Government Service Production: The Politics of Allocative Sluggishness," Public Choice, Springer, vol. 82(1-2), pages 135-57, January.
- Lars-Erik Borge & Jørn Rattsø, 2008.
"Young and Old Competing for Public Welfare Services,"
CESifo Working Paper Series
2223, CESifo Group Munich.
- Lars-Erik Borge & Jørn Rattsø, 2007. "Young and old competing for public welfare services," Working Paper Series 8607, Department of Economics, Norwegian University of Science and Technology.
- Borge, Lars-Erik & Rattso, Jorn, 1995. "Demographic shift, relative costs and the allocation of local public consumption in Norway," Regional Science and Urban Economics, Elsevier, vol. 25(6), pages 705-726, December.
- Poterba, James M, 1998. "Demographic Change, Intergenerational Linkages, and Public Education," American Economic Review, American Economic Association, vol. 88(2), pages 315-20, May.
- Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 373-88, September.
- Breyer, Friedrich, 1994. "The political economy of intergenerational redistribution," European Journal of Political Economy, Elsevier, vol. 10(1), pages 61-84, May.
When requesting a correction, please mention this item's handle: RePEc:nst:samfok:10009. 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: (Hilde Saxi Gildberg)
If references are entirely missing, you can add them using this form.