Wage Inequality,Increased Competition,and Trade Liberalization: Short Run vs Long Run |
| |
| Authors: | Sajid Anwar |
| |
| Institution: | 1. Faculty of Business, University of the Sunshine Coast, Australia;2. The author is extremely grateful to two anonymous referees for very helpful comments and suggestions. All remaining errors and imperfections are the sole responsibility of the author. |
| |
| Abstract: | This paper examines the impact of increased competition and trade liberalization on skilled–unskilled wage inequality in the short run as well as the long run. It is shown that an increase in the number of firms in the producer services sector increases wage inequality in the short run even if the income shares of capital in the industrial and agricultural sectors were identical. A decrease in the services sector's fixed cost decreases wage inequality in the short run if the income share of capital in the agricultural sector is relatively large. Owing to the presence of external economies, a decrease in the services sector's fixed cost increases wage inequality in the long run. A decrease in import duty on the agricultural good increases wage inequality in the short as well as the long run but its effect in the long run is stronger due to the presence of external economies in the industrial sector. |
| |
| Keywords: | |
|
|
