International factor mobility, monopolistic competition, and wage inequality

Jiancai Pi, Yu Zhou and Jun Yin

Economic Modelling, 2013, vol. 33, issue C, 326-332

Abstract: This paper introduces monopolistic competition into two-sector general equilibrium models to investigate the impacts of international factor mobility on the skilled–unskilled wage inequality. The basic model shows that the change of skilled–unskilled wage inequality is determined by the comparison of the capital–labor distributive shares between the two sectors. The extended model finds that when the output of the monopolistically competitive sector is non-tradable, the mechanism in the basic model fails to work. Thus, we should pay special attention to the role that the non-tradable feature of final-good production plays. In addition, the welfare effects of an FDI inflow are also examined by the basic and extended models.

Keywords: FDI; Skilled immigration; Unskilled immigration; Wage inequality; Monopolistic competition (search for similar items in EconPapers)
JEL-codes: F21 J31 L13 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:33:y:2013:i:c:p:326-332

DOI: 10.1016/j.econmod.2013.04.013

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