Skilled-Unskilled Wage Inequality, Growth of Skilled Labour and Development Policies

2014 ◽  
Vol 5 (1) ◽  
Author(s):  
Manash Ranjan Gupta ◽  
Priya Brata Dutta
Keyword(s):  
Steady State ◽  
Wage Inequality ◽  
Open Economy ◽  
Relative Wage ◽  
Agricultural Product ◽  
Skilled Workers ◽  
Current Output ◽  
Skilled Labour ◽  
Traded Goods ◽  
Unskilled Labour

AbstractThis paper develops a small open economy model with three sectors and four factors – land, unskilled labour, skilled labour and capital. Two of these three sectors produce final traded goods of which one sector produces an agricultural product using land and unskilled labour and another sector produces a manufacturing product using skilled labour and capital. The third sector, called education sector produces a service using skilled labour and capital as inputs; and this service transforms unskilled workers into skilled workers. The current output is added to the existing stock of skilled labour at the next point of time. The paper first analyses various comparative static effects on skilled-unskilled relative wage in the static model where no factor endowment changes over time. Next, it analyses the long-run equilibrium properties in the dynamic model with intertemporal accumulation of skilled labour; and derives various comparative steady state effects on skilled unskilled relative wage. Comparative steady-state effects appear to be stronger than the corresponding comparative static effects.

Globalisation, crime and wage inequality: a theoretical analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manash Ranjan Gupta
Keyword(s):  
General Equilibrium ◽  
Wage Inequality ◽  
Open Economy ◽  
Small Open Economy ◽  
The Other ◽  
Skilled Workers ◽  
Production Sector ◽  
Content Type ◽  
Unskilled Labour ◽  
Rental Rate

Purpose This study aims to focus on the effects of economic globalisation programme on the problems of criminal activities and on the degree of skilled–unskilled wage inequality. Design/methodology/approach A competitive general equilibrium model of a small open economy is developed. Unskilled labour moves from the production sector to the criminal sector. Those who join the criminal sector snatch a part of capitalists’ income and skilled workers’ income to finance their consumption and face positive probability of being caught and punished. The size of the criminal sector and the rental rate on capital are simultaneously determined in the short-run equilibrium of this model where factor endowments are exogenously given at a particular point of time. Findings An increase in the capital endowment resulting from an exogenous foreign capital inflow raises demand for labour and wage rates in both the sectors. So, it lowers the rental rate on capital and thus aggravates the problem of skilled–unskilled wage inequality because the skilled labour using sector is more capital intensive than the other production sector. However, it may lower the size of the criminal sector and thus may raise the level of the gross domestic product. Originality/value There exists substantial theoretical works on the problem of skilled–unskilled wage inequality, but none of these works focuses on the general equilibrium allocation of unskilled labour to the criminal sector. On the other hand, existing models specialised to analyse theoretical implications of crime and punishment do not focus on the interaction between crime and wage inequality.

The Effects of Exogenous Technological Change on Wage Inequality in Rural India

2018 ◽  
Vol 19 (6) ◽  
pp. 1515-1537
Author(s):  
Arindam Banik ◽  
Pradip K. Bhaumik
Keyword(s):  
Wage Inequality ◽  
Poverty Reduction ◽  
Economic Benefits ◽  
Natural Setting ◽  
Skilled Workers ◽  
Economic Activities ◽  
Real Wages ◽  
Skilled Labour ◽  
Unskilled Labour ◽  
Unskilled Workers

This article develops a theoretical model that studies the economic benefits to skilled rural artisans receiving toolkits under a given poverty reduction programme. The model encompasses the frameworks for understanding the relationship between the supply of skilled labour (artisans) with improved toolkits, changes in rural economic activities and the relative incomes. Consequently, it provides a natural setting to infer their empirical relevance. The counterfactual analysis from a large sample of data reveals that once the toolkits are provided to the rural skilled artisans, the artisans as a broad social group are more likely to have benefited from the programme. Less benefit can be, but is not necessarily, associated with poor education level and other assets owned by the rural artisans. More interestingly, while the real wages of skilled workers are expected to rise due to the use of skill-biased toolkits, the wages of unskilled workers may either remain unaffected or even fall. The issue of supply of skilled labour has, therefore, become an area of immense interest largely because of the rising inequality in the relative wages of skilled and unskilled labour.

scholarly journals Fairness, Search Frictions, and Offshoring

2013 ◽  
Vol 13 (1) ◽  
pp. 137-172 ◽  
Author(s):  
Devashish Mitra ◽  
Priya Ranjan
Keyword(s):  
Wage Inequality ◽  
Open Economy ◽  
Closed Economy ◽  
Skilled Workers ◽  
Unemployment Rates ◽  
Unskilled Workers ◽  
Fairness Concerns ◽  
The Cost ◽  
The Impact

Abstract: Fairness considerations are introduced into the determination of wages in a two factor Pissarides-style model of search unemployment to study its implications for the unemployment rates of unskilled and skilled workers in both the closed economy case and when the economy can offshore some inputs. Both fairness concerns and offshoring of jobs done by unskilled workers create the overhiring effect for skilled workers. An increase in the concern for fairness in the closed economy increases the cost of hiring unskilled workers and increases the unemployment rates of both types of workers; however, wage inequality decreases. In the open economy case, an increase in the concern for fairness leads to greater offshoring which prevents skilled unemployment from increasing, but the unemployment of unskilled workers increases. A reduction in the cost of offshoring also increases offshoring and increases the unemployment of unskilled workers, but has a positive effect on skilled workers. Due to the presence of an overhiring effect in the hiring of skilled workers for both offshoring and non-offshoring firms, skilled workers experience higher wages and lower unemployment. The opposite movements in skilled and unskilled unemployment render the net effect ambiguous. Even though wage inequality increases, the impact on the wages of unskilled workers is ambiguous.

Wage Inequality and Unemployment in the Presence of Imported Intermediate Goods: A Theoretical Analysis

2021 ◽  
pp. 001573252098689
Author(s):  
Priya Brata Dutta ◽  
Nirjhar Ghosh
Keyword(s):  
Wage Inequality ◽  
Open Economy ◽  
Service Sector ◽  
Agricultural Sector ◽  
Small Open Economy ◽  
Capital Inflow ◽  
Intermediate Goods ◽  
Jel Codes ◽  
Unskilled Labour ◽  
Critical Policy

This article develops a static three-sector and five-factor competitive general equilibrium model of a small open economy: sector 1 is the rural agricultural sector, which produces products using informal or unorganised unskilled labour and land as inputs; sector 2 is the urban manufacturing, final-goods-producing sector that produces products with the help of unskilled labour, who get unionised wages, and capital; and sector 3 is the service sector, which uses skilled labour with formal wages, capital and sophisticated hi-technology-intensive imported intermediate goods produced abroad as inputs. We show that an exogenous increase in capital inflow or an increase in tariff on imported intermediate input reduces the skilled–unskilled wage inequality and lowers unemployment as long as the return to capital is unaltered and output adjustments absorb the entire shock of the two policies. Such capital inflow increases rural wage and reduces unemployment via the Harris Todaro mechanism but interestingly does not allow the skilled wage to increase. Thus, two critical policy targets can be accommodated at the same time. JEL Codes: F13, J31, J46

Does the Choice between Wage Inequality and Unemployment Affect Productivity Growth?

2006 ◽  
Vol 7 (1) ◽  
pp. 87-112 ◽  
Author(s):  
Lutz G. Arnold
Keyword(s):  
Human Capital ◽  
Wage Inequality ◽  
Productivity Growth ◽  
Capital Accumulation ◽  
Overlapping Generations ◽  
Wage Distribution ◽  
Relative Wage ◽  
Wage Rigidity ◽  
Skilled Workers ◽  
Ceteris Paribus

Abstract We present a non-scale continuous-time overlapping-generations growth model that provides an explanation for why economies with relative wage rigidity feature higher unemployment, but not slower productivity growth, than economies with flexible wages. The compression of the wage distribution associated with relative wage rigidity slows down human capital accumulation and growth ceteris paribus. But unemployment among the low-skilled workers strengthens the incentives to invest in human capital and, hence, growth. The two effects are offsetting, and growth is independent of the prevailing degree of relative wage rigidity. This knife-edge result is robust with respect to some modifications of the model.

The dollar, trade, technology and inequality in the USA

1998 ◽  
Vol 166 ◽  
pp. 78-86 ◽  
Author(s):  
Bob Anderton ◽  
Paul Brenton
Keyword(s):  
Technological Change ◽  
Relative Wage ◽  
Skilled Workers ◽  
Wage Bill ◽  
Sudden Rise ◽  
The Us ◽  
The Usa ◽  
Trade Competitiveness ◽  
The Impact ◽  
High Skill

The US experienced a considerable increase in inequality between skilled and less-skilled workers during the early 1980s—a period which corresponds with a large temporary appreciation of the dollar. This article investigates the reasons behind this rise in inequality by evaluating the impact of trade with low-wage countries (LWCs) and technological change on the wage bill share of skilled workers (which is designed to capture movements in inequality arising from changes in both the relative wage and employment opportunities of the less-skilled). We find that an increase in US imports from LWCs—encouraged by the large appreciation of the dollar in the early 1980s—seems to explain some of the rise in US inequality in low-skill-intensive sectors, but that technological change (proxied by R&D expenditure) explains the rise in inequality in high-skill-intensive sectors. However, given that the timing of the sudden rise in US R&D expenditure corresponds with the appreciation of the dollar, it may be the case that the deterioration in US trade competitiveness during this period contributed to the rapid increase in the rate of technological change via mechanisms such as ‘defensive innovation’. Hence one might also argue that the technology-based explanation for the rise in US inequality could actually be a trade-based explanation.

scholarly journals International trade in services and inequalities

2016 ◽  
Vol 23 (5) ◽  
pp. 1069-1075 ◽  
Author(s):  
Sylvain Petit
Keyword(s):  
Wage Inequality ◽  
Developed Countries ◽  
Tourism Industry ◽  
Skilled Workers ◽  
Business Services ◽  
Long Run ◽  
Short Run ◽  
Unskilled Workers ◽  
Tourism Services ◽  
The Impact

This study investigates the impact of the international openness in tourism services trade on wage inequality between highly skilled, semi-skilled, and unskilled workers in the tourism industry. The sample covers 10 developed countries and expands over 15 years. A cointegrated panel data model and an error correction model were used to distinguish between the short- and long-run effects. The results are compared to those of openness of business services and manufactured goods. The findings point out that tourism increases wage inequality at the expense of the least skilled workers in the long run and the short run.

Trade Tax Reform in a Small Open Economy with Distributional Objectives and Distortionary Taxation

2002 ◽  
Vol 1 (1) ◽  
Author(s):  
Jeremy Edwards
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Small Open Economies ◽  
Tax Reforms ◽  
Distortionary Taxation ◽  
Nontraded Goods ◽  
Traded Goods ◽  
Consumer Prices ◽  
Distortionary Taxes ◽  
The One

Abstract The paper shows that, if two conditions are satisfied, both radial contraction and concertina trade tax reforms continue to be desirable in a small open economy that differs from the one usually considered by having distributional objectives and using distortionary taxes to raise revenue. The first condition is that some optimisation in the choice of commodity taxes takes place - at a minimum, taxes on nontraded goods must be optimally chosen while taxes on traded goods keep the consumer prices of such goods constant. The second is that pure profits are absent from every household's budget constraint. These conditions mean that some care is required in arguing the case for simple trade tax reforms in small open economies.

scholarly journals The emission properties, structure and stability of ionic liquid menisci undergoing electrically assisted ion evaporation

2022 ◽  
Vol 933 ◽  
Author(s):  
Ximo Gallud ◽  
Paulo C. Lozano
Keyword(s):  
Ionic Liquid ◽  
Steady State ◽  
Ion Source ◽  
Emission Region ◽  
Tension Stress ◽  
Liquid Temperature ◽  
Axially Symmetric ◽  
Current Output ◽  
Hydraulic Impedance ◽  
Ion Evaporation

The properties and structure of electrically stressed ionic liquid menisci experiencing ion evaporation are simulated using an electrohydrodynamic model with field-enhanced thermionic emission in steady state for an axially symmetric geometry. Solutions are explored as a function of the external background field, meniscus dimension, hydraulic impedance and liquid temperature. Statically stable solutions for emitting menisci are found to be constrained to a set of conditions: a minimum hydraulic impedance, a maximum current output and a narrow range of background fields that maximizes at menisci sizes of 0.5–3 ${\rm \mu}{\rm m}$ in radius. Static stability is lost when the electric field adjacent to the electrode that holds the meniscus corresponds to an electric pressure that exceeds twice the surface tension stress of a sphere of the same size as the meniscus. Preliminary investigations suggest this limit to be universal, therefore, independent of most ionic liquid properties, reservoir pressure, hydraulic impedance or temperature and could explain the experimentally observed bifurcation of a steady ion source into two or more emission sites. Ohmic heating near the emission region increases the liquid temperature, which is found to be important to accurately describe stability boundaries. Temperature increase does not affect the current output when the hydraulic impedance is constant. This phenomenon is thought to be due to an improved interface charge relaxation enhanced by the higher electrical conductivity. Dissipated ohmic energy is mostly conducted to the electrode wall. The higher thermal diffusivity of the wall versus the liquid, allows the ion source to run in steady state without heating.

scholarly journals Manufacturing and agricultural pollution, private mitigation and wage inequality in the presence of pollution externalities

2019 ◽  
Vol 65 (No. 2) ◽  
pp. 51-58
Author(s):  
Dianshuang Wang
Keyword(s):  
Wage Inequality ◽  
Agricultural Production ◽  
Wage Gap ◽  
The Self ◽  
Agricultural Pollution ◽  
Mitigation Cost ◽  
Unskilled Labour ◽  
Agricultural Pollutants ◽  
Environmental Protection Policies ◽  
The Impact

The paper incorporates manufacturing and agricultural pollution into a three-sector general equilibrium model with pollution externalities both on agricultural production and labour health. Manufacturing generates pollution that affects agricultural production and health, while agriculture employs the pollutant as a factor for production that only affects health. Under the framework, this paper investigates the impacts of environmental protection policies and a rise in the self-mitigation cost of skilled and unskilled labour on wage inequality. A larger environmental tax expands wage gap if partial elasticity of substitution between labour and dirty input in the urban unskilled sector is small enough. More restrictive agricultural pollutants control narrows down the wage gap. The impact of an increase in the self-mitigation cost of skilled labour on wage inequality is ambiguous, depending on the factors substitution in agriculture and the elasticity of manufacturing pollution on agricultural production, while a larger self-mitigation cost of unskilled labour brings down the wage gap.

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