Taxation of labour, product varieties and skilled–unskilled wage inequality: Short run versus long run
Sizhong Sun and
Sajid Anwar ()
International Review of Economics & Finance, 2015, vol. 38, issue C, 250-257
In a three-sector general equilibrium model, we examine the impact of a partial tax on labour on skilled–unskilled wage inequality. We find that a tax on labour in industrial sector increases skilled–unskilled wage inequality in the short run and can have the opposite effect in the long run. A tax on labour in the services sector reduces skilled–unskilled wage inequality in both the short run and long run. Furthermore, the introduction of a tax on labour in agricultural sector has no effect on the skilled wage but reduces the unskilled wage. Accordingly, such a tax increases skilled–unskilled wage inequality in both the short run and long run.
Keywords: Skilled–unskilled wage inequality; Partial tax on labour; Product varieties; Monopolistic competition (search for similar items in EconPapers)
JEL-codes: J31 H24 D00 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:38:y:2015:i:c:p:250-257
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