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Input trade reform and wage inequality

Input trade reform and wage inequality
Input trade reform and wage inequality

This paper, using a general equilibrium model of production and trade for a developing country with non-traded goods, dual unskilled labour markets and internationally fragmented skill-intensive production, illuminates how liberalised input trade affects the unskilled wages prevailing in the informal sectors and employment conditions in those sectors. Numerical analysis further highlights importance of the elasticities of factor substitution in production of different sectors to determine the movement in informal wage and therefore the movement in skilled–unskilled wage gap. These results are consistent with the empirical evidence on developing countries (like India) that suggests liberalisation-inequality relationship cannot be explained by focusing on tradable goods alone.

General equilibrium, Informal employment, Informal wage, Input trade reform, Non-traded goods, Wage inequality
1059-0560
145-156
Mukherjee, Soumyatanu
3eb37c57-3efd-4203-a81b-de3acad02811
Mukherjee, Soumyatanu
3eb37c57-3efd-4203-a81b-de3acad02811

Mukherjee, Soumyatanu (2017) Input trade reform and wage inequality. International Review of Economics and Finance, 51, 145-156. (doi:10.1016/j.iref.2017.05.011).

Record type: Article

Abstract

This paper, using a general equilibrium model of production and trade for a developing country with non-traded goods, dual unskilled labour markets and internationally fragmented skill-intensive production, illuminates how liberalised input trade affects the unskilled wages prevailing in the informal sectors and employment conditions in those sectors. Numerical analysis further highlights importance of the elasticities of factor substitution in production of different sectors to determine the movement in informal wage and therefore the movement in skilled–unskilled wage gap. These results are consistent with the empirical evidence on developing countries (like India) that suggests liberalisation-inequality relationship cannot be explained by focusing on tradable goods alone.

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More information

Accepted/In Press date: 22 May 2017
e-pub ahead of print date: 25 May 2017
Published date: 1 September 2017
Keywords: General equilibrium, Informal employment, Informal wage, Input trade reform, Non-traded goods, Wage inequality

Identifiers

Local EPrints ID: 439094
URI: http://eprints.soton.ac.uk/id/eprint/439094
ISSN: 1059-0560
PURE UUID: 4c4270ff-980f-4d84-95f3-084f03bbabcb
ORCID for Soumyatanu Mukherjee: ORCID iD orcid.org/0000-0003-0674-1064

Catalogue record

Date deposited: 03 Apr 2020 16:30
Last modified: 28 Apr 2022 02:30

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