 Urban development, excessive entry of firms and wage inequality in developing countriesHamid Beladi, Chi‐Chur Chao, Mong Shan Ee and Daniel Hollas The World Economy, 2020, vol. 43, issue 1, 212-238 Abstract: This paper examines the short and long‐term effects of urbanisation, via favourable urban development policies, on income distribution and social welfare for a developing country, in which the urban manufacturing sector is characterised by imperfect competition and free entry. Urbanisation shifts rural workers to the highly productive urban sector, while causing production in urban firms to expand because of scale economies. However, urbanisation may worsen wage inequality between skilled and unskilled labour in the short term. In the long term, urbanisation can attract new firms to the urban sector and favourable urban development policies may result in excessive entry of firms, which can amplify wage inequality in the economy. This entry‐amplifying effect is confirmed empirically, especially for low and lower‐middle‐income countries. If the entry effect is not considered, the impact of urbanisation on wage inequality could be understated by 13% for low and lower‐middle‐income countries. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:43:y:2020:i:1:p:212-238 Ordering information: This journal article can be ordered from Access Statistics for this article The World Economy is currently edited by David Greenaway More articles in The World Economy from Wiley Blackwell |
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