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Input trade reform and wage inequality

Soumyatanu Mukherjee ()

International Review of Economics & Finance, 2017, vol. 51, issue C, 145-156

Abstract: This paper, using a general equilibrium model of production and trade for a developing country with non-traded goods, dual unskilled labour markets and internationally fragmented skill-intensive production, illuminates how liberalised input trade affects the unskilled wages prevailing in the informal sectors and employment conditions in those sectors. Numerical analysis further highlights importance of the elasticities of factor substitution in production of different sectors to determine the movement in informal wage and therefore the movement in skilled–unskilled wage gap. These results are consistent with the empirical evidence on developing countries (like India) that suggests liberalisation-inequality relationship cannot be explained by focusing on tradable goods alone.

Keywords: Input trade reform; Non-traded goods; Informal wage; Informal employment; Wage inequality; General equilibrium (search for similar items in EconPapers)
JEL-codes: F11 F13 J31 J46 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:reveco:v:51:y:2017:i:c:p:145-156