Fair wages, Urban Unemployment and Welfare in a Developing Economy

Hamid Beladi, Chi-Chur Chao and Daniel Hollas ()
Additional contact information
Daniel Hollas: university of texas at san antonio

Economics Bulletin, 2011, vol. 31, issue 1, 273-285

Abstract: This paper studies the impact of pay fairness on factor income and social welfare in a developing economy with both modern urban and traditional rural sectors. When urban workers become aware of income fairness, they use the expected urban wage and weighted average returns to capitalists as their reference pay. This perception of fairness raises the urban wage and enlarges the wage gap between the urban and rural sectors. The ensuing above market-clearing wage rate causes urban unemployment. Greater wage fairness worsens urban unemployment and lowers social welfare in the economy.

Keywords: Fair wage; wage inequality; urban unemployment; welfare (search for similar items in EconPapers)
JEL-codes: O1 R0 (search for similar items in EconPapers)
Date: 2011-01-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I1-P27.pdf (application/pdf)

Related works:
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:ebl:ecbull:eb-10-00674

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().