Climate change and wage inequality

Jiancai Pi and Yuhan Luo ()
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Yuhan Luo: Nanjing University

Journal of Economics, 2024, vol. 143, issue 3, No 3, 279-303

Abstract: Abstract We develop general equilibrium models that incorporate an agricultural equipment sector to explore the impact of climate change on skilled-unskilled wage inequality in a small open economy, with a specific focus on the role of the domestic capital market. In the model with the agricultural equipment sector using skilled labor as input, we illustrate that climate change decreases both skilled and unskilled wages. However, its effect on wage inequality varies depending on the discrepancy of the capital intensity between the urban skilled and unskilled sectors. Moreover, if the demand for capital in the agricultural equipment sector significantly influences the capital market, this sector will not only act as a buffer, but also trigger a reversal change of wage inequality. To enhance the robustness of our findings, we extend the model to include considerations of public goods provision and taxation.

Keywords: Climate change; Wage inequality; General equilibrium approach; Agricultural equipment sector (search for similar items in EconPapers)
JEL-codes: D58 J31 Q54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:143:y:2024:i:3:d:10.1007_s00712-024-00877-8

DOI: 10.1007/s00712-024-00877-8

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