Institutional quality and skilled–unskilled wage inequality

Jiancai Pi and Yu Zhou

Economic Modelling, 2013, vol. 35, issue C, 356-363

Abstract: This paper establishes two-sector general equilibrium models in the presence of unproductive activities to investigate how an improvement of the institutional quality influences the skilled–unskilled wage inequality. We find that an improvement of the institutional quality will affect the interest rate, and then the interest rate combining with the capital intensity will generate an impact on the skilled–unskilled wage inequality. Specifically, both the interest rate and comparisons of the capital–labor relative distributive shares between two sectors play an important role in determining the skilled–unskilled wage gap in an economy featured with unproductive activities. The above results are robust even when we extend the basic theoretical model in several different ways.

Keywords: Institutional quality; Skilled–unskilled wage inequality; General equilibrium model (search for similar items in EconPapers)
JEL-codes: D73 J31 O12 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:356-363

DOI: 10.1016/j.econmod.2013.07.029

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