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Structural change and wage inequality

Jiancai Pi and Pengqing Zhang

International Review of Economics & Finance, 2018, vol. 58, issue C, 699-707

Abstract: This paper investigates how structural change driven by factor intensity differences affects the skilled-unskilled wage inequality through the three-sector general equilibrium approach. In the basic model, we find that when structural change happens in the urban skilled sector (resp. the urban unskilled sector), the wage inequality will be expanded (resp. narrowed down) if the capital-labor ratio in this sector is larger than one. In the extended models, we introduce urban unemployment and the open capital market separately into the basic model, and find that the main results of the basic model almost still hold.

Keywords: Structural change; Wage inequality; General equilibrium approach (search for similar items in EconPapers)
JEL-codes: J31 O11 O14 O25 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:reveco:v:58:y:2018:i:c:p:699-707