Redistribution and wage inequality

Jiancai Pi and Pengqing Zhang

International Review of Economics & Finance, 2021, vol. 72, issue C, 510-523

Abstract: This paper explores how redistribution affects skilled-unskilled wage inequality through the general equilibrium approach. We analyze six redistribution policies, which includes redistribution from (1) skilled labor to unskilled labor, (2) unskilled labor to skilled labor, (3) capital owners to skilled labor, (4) capital owners to unskilled labor, (5) skilled labor to capital owners, and (6) unskilled labor to capital owners. We find that redistribution policy (1) will reduce wage inequality, while redistribution policy (2) will increase wage inequality. For redistribution policies (3)–(6), how redistribution affects wage inequality depends on the labor intensities of the skilled sector and the unskilled sector. The result shows that redistribution does not necessarily reduce skilled-unskilled wage inequality.

Keywords: Redistribution; Wage inequality; General equilibrium approach (search for similar items in EconPapers)
JEL-codes: D33 H23 J31 O12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:72:y:2021:i:c:p:510-523

DOI: 10.1016/j.iref.2020.12.017

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