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Foreign Capital Inflow, Skilled-Unskilled Wage Inequality and Unemployment of Unskilled Labour in a Fair Wage Model

Sarbajit Chaudhuri () and Dibyendu Banerjee

MPRA Paper from University Library of Munich, Germany

Abstract: This paper has developed a three-sector general equilibrium framework that explains unemployment of both skilled and unskilled labour. Unemployment of unskilled labour is of the Harris-Todaro (1970) type while unemployment of skilled labour is caused due to the validity of the FWH in the high-skill sector. There are two types of capital one of which is specific to the primary export sector while the other moves freely among the different sectors. Inflows of foreign capital of either type unambiguously improve the economic conditions of the unskilled working class. However, the effects on the skilled-unskilled wage inequality and the extent of unemployment of both types of labour crucially hinge on the properties implied by the efficiency function of the skilled workers.

Keywords: Fair wage hypothesis; skilled labour; unskilled labour; wage inequality; foreign capital; unemployment (search for similar items in EconPapers)
JEL-codes: F13 J41 O15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2009-08-15
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Journal Article: Foreign capital inflow, skilled-unskilled wage inequality and unemployment of unskilled labour in a fair wage model (2010) Downloads
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