Skill Formation, Capital Adjustment Cost and Wage Inequality
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.
|Date of creation:||30 Mar 2009|
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- Oded Stark & Christian Helmenstein & Alexia Prskawetz, 1998.
"Human Capital Depletion, Human Capital Formation, and Migration: A Blessing in a "Curse"?,"
Departmental Working Papers
_096, Chinese University of Hong Kong, Department of Economics.
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"International Migration and "Educated Unemployment","
7126, University of Bonn, Center for Development Research (ZEF).
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- 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.
- Sarbajit Chaudhuri & Shigemi Yabuuchi, 2005. "Economic Liberalization And Wage Inequality In The Presence Of Labour Market Imperfection," International Trade 0510008, EconWPA.
- 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.
- 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.
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