Factor Mobility and Wage Inequality

Oda, Masao; Stapp, Robert

doi:10.1007/978-3-540-78676-4_8

Cited by 4 publications

(1 citation statement)

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“…On the other hand, Anwar () shows that emigration of unskilled labor must increase wage inequality if the income share of capital in the industrial sector is larger than the service sector. Furthermore, in case of developed countries, Oda and Stapp () show that simultaneous inflow of skilled and unskilled labor and capital can cause wage inequality in favor of the skilled.…”

Section: Introductionmentioning

confidence: 99%

Emigration, Finite Changes and Wage Inequality

Beladi

Kar²,

Marjit

2012

Economics & Politics

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Emigration leads to finite changes in structure of production and sectors vanish because they cannot pay higher wages. Does emigration of one type of labor hurt the other non-emigrating type in this set up? We demonstrate various scenarios when real incomes of the emigrating and the non-emigrating types do not move together. This generalizes some of the existing results in the literature. In particular, emigration can lead to a drastic change in the degree of inequality depending on which of the sectors survive in the post-emigration regime. JEL Classifications: D50, F2, J61,Keywords: Skill, emigration, wages, inequality, reallocation 3 IntroductionIn recent years a body of literature has emerged analyzing the impact of international labor mobility on wage distribution in the source country. 1 In particular, this literature addresses the question how emigration of skilled and unskilled labor from low wage to high wage countries affects the degree of wage inequality in the low wage country. Marjit and Kar (2005) provide a simple model and derive an intuitively appealing condition under which wage distribution may go against the residual workers of the emigrating group. Using a specific factor model, this study shows that regardless of the emigrating category -skilled or unskilled -return to capital declines following emigration and subsequently raises the return for workers of the non-emigrating type.Indeed, in some cases residual members of the non-emigrating factor may benefit more than the emigrating group affecting wage inequality in an unexpected manner. Thus, We offer a generalized model where many of these results should hold and hence help to synthesize issues related to emigration. In addition, we demonstrate that factor mobility can be critically responsible for 'finite changes' such that some sectors completely 'vanish' from the source country.Between two alternative occupations a factor will always choose the one that promises higher rate of return. As factors of production are allowed free entry and exit in a global space the general lesson from trade theory suggests that the set of goods produced in a country may change along with that. In particular, given world prices certain production activities/services 5 might turn out to be unprofitable for certain countries. Such 'finite' changes in trade theory do not receive much attention but surely opens up interesting possibilities. Jones (1996) In the present case, mobility of factors affect factor returns in such a way that production of certain commodities would no longer be viable. An example from the Indian tea industry demonstrates effect of domestic factor mobility. The tea industry in India depends heavily on garden laborers who develop a particular skill in plucking green leaves. Hand plucking of leaves have strong influence on quality and hence pricing of tea. However, in recent times higher industrial wages elsewhere have raised the opportunity cost of these workers resulting in large exodus from tea gardens. The tea gardens find i...

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Section: Introductionmentioning

confidence: 99%

Emigration, Finite Changes and Wage Inequality

Beladi

Kar²,

Marjit

2012

Economics & Politics

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International Fragmentation, Skill Formation and Emigration: A General Equilibrium Approach

Basak,

Gupta

2024

Foreign Trade Review

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This article departs from only conventional trade in final goods and focuses on the incentive that induces the producers of final goods to import raw materials from abroad instead of using domestically produced intermediate goods. The article then explores the plausible impact of skill formation and emigration of both unskilled and skilled labour on the incentive for fragmentation. The results suggest that a drive towards skill formation expands the zone of international fragmentation. Again, emigration of either type of labour usually reduces the incentive to fragment the production process. The effect on the overall volume of imports depends on the degree of complementarity between factors of production like skilled labour and foreign capital. Not only does the article capture the trade-off between emigration and skill formation and their opposite impact on the zone of fragmentation, but it also captures the linkage between the emigration of unskilled workers and their skill formation by introducing the concept of ‘unskilled-pushed skilled emigration’. JEL Classification: F11, F12, F16, F22

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Emigration, Wage Inequality and Vanishing Sectors

Marjit

Kar

2009

SSRN Journal

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Emigration leads to finite changes in structure of production and sectors vanish because they cannot pay higher wages. Does emigration of one type of labor hurt the other non-emigrating type in this set up? We demonstrate various scenarios when real income of the emigrating and the non-emigrating type do not move together and in the process generalize some of the existing results in the literature. In particular emigration can lead to a drastic change in the degree of inequality depending on which sectors survive in the post-emigration scenario. IntroductionIn recent years a body of literature has emerged analyzing the impact of international labor mobility on wage distribution in the source country. In particular, this literature addresses the question how emigration of skilled and unskilled labor from low wage to high wage countries affects the degree of wage inequality in the low wage country. Marjit and Kar (2005) provide a simple model and derive an intuitively appealing condition under which wage distribution may go against the residual workers of the emigrating group. Using a specific factor model, this study shows that regardless of the emigrating category -skilled or unskilled -return to capital declines following emigration and subsequently raises the return for workers of the non-emigrating type.Indeed, in some cases residual members of the non-emigrating factor may benefit more than the emigrating group affecting wage inequality in an unexpected manner. These and various other issues that wage inequality spawned by factor mobility discussed so far necessitate a synthetic analysis. We therefore offer a model with greater generality within which many of these results should hold. In addition, we demonstrate that factor mobility can be critically responsible for 'vanishing' sectors in the source Between two alternative occupations a factor will always choose the one that promises higher rate of return. As factors of production are allowed free entry and exit in a global space the general lesson from trade theory suggests that the set of goods produced in a country may change along with that. In particular, given world prices certain production activities/services might turn out to be unprofitable for certain countries. Such 'finite' changes in trade theory do not receive much attention but surely opens up interesting possibilities. Recently, Jones (1996) and Jones and Findlay (2007, Letters) have considered implications of vanishing sectors in a different context. Finite changes typically refer to circumstances when the output contraction is fairly drastic.Jones and Marjit (1992) provide an interesting perspective in a many factor many commodity world. In specific factor models (Jones, 1971) no sector can completely vanish because of the necessity of employing the specific factor. Of course, they do not consider the possibility that such specific factor is internationally mobile.In a standard Heckscher-Ohlin framework with two factors, however, a vanishing sector is clearly feasible under...

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Factor Mobility and Wage Inequality

Cited by 4 publications

References 13 publications

Emigration, Finite Changes and Wage Inequality

Emigration, Finite Changes and Wage Inequality

International Fragmentation, Skill Formation and Emigration: A General Equilibrium Approach

Emigration, Wage Inequality and Vanishing Sectors

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