SKILL FORMATION, CAPITAL ADJUSTMENT COST AND WAGE INEQUALITY

Shigemi Yabuuchi and Sarbajit Chaudhuri

Review of Urban & Regional Development Studies, 2009, vol. 21, issue 1, 2-13

Abstract: The paper employs a three†sector general equilibrium model for examining the consequences of an infrastructure development scheme to the education sector and an inflow of foreign capital on the skilled†unskilled wage inequality in a developing economy. The education sector faces a capital adjustment cost for which the effective unit cost of capital depends positively on the amount of capital employed. Although both infrastructure development schemes and inflows of foreign capital lead to higher skill formation, the policies produce incongruent effects on the wages of skilled and unskilled labor. Furthermore, the effects of the policies on the skilled†unskilled wage inequality depend crucially on the relative factor intensities of the low†skill and high†skill sectors. Finally, which of the two policies a country should adopt will depend on technological, institutional and trade related factors.

Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1111/j.1467-940X.2009.00156.x

Related works:
Working Paper: Skill Formation, Capital Adjustment Cost and Wage Inequality (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:revurb:v:21:y:2009:i:1:p:2-13

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0917-0553

Access Statistics for this article

More articles in Review of Urban & Regional Development Studies from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().