SKILLED‐UNSKILLED WAGE INEQUALITY AND URBAN UNEMPLOYMENT

Economic Inquiry - Tập 48 Số 4 - Trang 997-1007 - 2010
Hamid Beladi1, Avik Chakrabarti2, Sugata Marjit3,4
1Beladi: Professor, Department of Economics, College of Business, University of Texas at San Antonio, One UTSA Circle, San Antonio, TX 78249-0633. Phone 210-458-7038,
2Chakrabarti: Associate Professor, Department of Economics, College of Letters and Science, University of Wisconsin-Milwaukee, 816 Bolton Hall, PO Box 413, Milwaukee, WI 53201. Phone 414-229-4680,
3Marjit: Professor, Department of Economics, Centre for Studies in Social Sciences, R-1 Baishnabghata Patuli Township, Calcutta 700-094, West Bengal, India. Phone 852-2788-7745,
4We wish to thank anonymous referee(s) for insightful comments and suggestions on an earlier version of this paper. The usual disclaimer applies.

Tóm tắt

The impact of trade liberalization on the labor market in the North has drawn tremendous attention in the face of the growing skilled‐unskilled wage gap but in the South it has been somewhat neglected. One of the key structural differences between the North and the South is that the South experiences a pronounced rural‐urban migration in the presence of urban unemployment. We introduce this feature in the structure of a simple general equilibrium model to analyze the effects of trade liberalization and fragmentation on employment and the skilled‐unskilled wage differential in the South. In particular, we show that while fragmentation necessarily improves the unskilled wage and the skilled wage, more lucrative global opportunities for the skilled final product, in the absence of fragmentation, can reduce the rural wage and increase urban unemployment. The effect of fragmentation, ceteris paribus, on the skilled‐unskilled wage gap is sensitive to the degree of substitutability between land and unskilled labor. As such, fragmentation can magnify the increase in the skilled‐unskilled wage gap resulting from an improvement in the terms of trade. It is also shown that a technological progress in the intermediate goods sector increases the skilled‐unskilled wage gap and raises urban unemployment.(JELF1, O1, F11, F12)

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Economic Inquiry

Tập 48 Số 4

997-1007

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