Economic liberalization and wage inequality in the presence of labour market imperfection |
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Authors: | Sarbajit Chaudhuri Shigemi Yabuuchi |
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Institution: | aDepartment of Economics, University of Calcutta, 56A, B.T. Road, Kolkata 700 050, India;bDepartment of Economics, Nagoya City University, Yamanohata, Mizuho, Nagoya 467-8501, Japan |
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Abstract: | This paper is purported to analyze the consequences of liberalized economic policies on the skilled–unskilled wage inequality in the developing countries using a three sector general equilibrium model reasonable for at least a few developing economies. The analysis of the paper has found that the wage inequality rises unambiguously due to a reduction of import tariff from the low-skill manufacturing sector. However, an inflow of foreign capital produces a favourable effect on the wage inequality under a reasonable factor intensity condition. Interestingly, contrary to the common wisdom, a policy of labour market reform may raise the competitive unskilled wage and improve wage inequality under reasonable condition. |
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Keywords: | Skilled labour Unskilled labour Wage inequality Latin American countries Trade liberalization Labour market imperfection |
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