IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/18381.html
   My bibliography  Save this paper

Skill Formation, Capital Adjustment Cost and Wage Inequality

Author

Listed:
  • Yabuuchi, Shigemi
  • Chaudhuri, Sarbajit

Abstract

The paper employs a three-sector general equilibrium model for examining the consequences of an infrastructure development scheme to the education sector and an inflow of foreign capital on the skilled-unskilled wage inequality in a developing economy. The education sector faces a capital adjustment cost for which the effective unit cost of capital depends positively on the amount of capital employed. Although both infrastructure development scheme and inflows of foreign capital lead to higher skill formation, the policies produce incongruent effects on the wages of skilled and unskilled labour. Furthermore, the effects of the policies on the skilled-unskilled wage inequality depend crucially on the relative factor intensities of the low-skill and high-skill sectors. Finally, which of the two policies should the country adopt depends on the technological, institutional and trade related factors.

Suggested Citation

  • Yabuuchi, Shigemi & Chaudhuri, Sarbajit, 2009. "Skill Formation, Capital Adjustment Cost and Wage Inequality," MPRA Paper 18381, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:18381
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/18381/1/MPRA_paper_18381.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Fan, C. Simon & Stark, Oded, 2007. "International migration and "educated unemployment"," Journal of Development Economics, Elsevier, vol. 83(1), pages 76-87, May.
    2. Jones, Ronald W. & Peter Neary, J., 1984. "The positive theory of international trade," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 1, pages 1-62 Elsevier.
    3. 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.
    4. Chaudhuri, Sarbajit & Yabuuchi, Shigemi, 2007. "Economic liberalization and wage inequality in the presence of labour market imperfection," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 592-603.
    5. Chau, Nancy H & Stark, Oded, 1999. "Migration under Asymmetric Information and Human Capital Formation," Review of International Economics, Wiley Blackwell, vol. 7(3), pages 455-483, August.
    6. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1998. "Human capital depletion, human capital formation, and migration: a blessing or a "curse"?," Economics Letters, Elsevier, vol. 60(3), pages 363-367, September.
    7. Kar, Saibal & Beladi, Hamid, 2004. "Skill formation and international migration: welfare perspective of developing countries," Japan and the World Economy, Elsevier, vol. 16(1), pages 35-54, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gupta Manash Ranjan & Dutta Priya Brata, 2014. "Skilled-Unskilled Wage Inequality, Growth of Skilled Labour and Development Policies," Journal of Globalization and Development, De Gruyter, vol. 5(1), pages 1-26, June.
    2. Jonck, Petronella & Goujon, Anne & Testa, Maria Rita & Kandala, John, 2015. "Education and crime engagement in South Africa: A national and provincial perspective," International Journal of Educational Development, Elsevier, vol. 45(C), pages 141-151.
    3. Chaudhuri, Sarbajit, 2014. "Does Public Assistance for Skills Formation Necessarily Improve Wage Inequality in the Future?," MPRA Paper 57788, University Library of Munich, Germany.
    4. Li, Xiaochun & Zhou, Yu, 2013. "An economic analysis of remittance of unskilled migration on skilled–unskilled wage inequality in labor host region," Economic Modelling, Elsevier, vol. 33(C), pages 428-432.
    5. Chaudhuri, Sarbajit, 2014. "Public Subsidy on Education, Welfare, and Wage Inequality in a Small Open Developed Economy: A Two-period Analysis," MPRA Paper 60330, University Library of Munich, Germany.
    6. Pan, Lijun, 2014. "The impacts of education investment on skilled–unskilled wage inequality and economic development in developing countries," Economic Modelling, Elsevier, vol. 39(C), pages 174-181.
    7. Acharyya, Rajat, 2010. "Successive Trade Liberalization and Wage Inequality," MPRA Paper 30158, University Library of Munich, Germany.
    8. 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.
    9. Chaudhuri, Sarbajit, 2010. "Economic recession, demand constraint and labour markets in a developing economy," MPRA Paper 27433, University Library of Munich, Germany.
    10. Gupta, Manash Ranjan & Dutta, Priya Brata, 2011. "Skilled-unskilled wage inequality and unemployment: A general equilibrium analysis," Economic Modelling, Elsevier, vol. 28(4), pages 1977-1983, July.

    More about this item

    Keywords

    Skill formation; skilled labour; unskilled labour; wage inequality; foreign capital; capital adjustment cost;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:18381. 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: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.