Search results

1 – 2 of 2
To view the access options for this content please click here
Book part
Publication date: 2 June 2008

Brati Sankar Chakraborty and Abhirup Sarkar

Most models attempting to give an account of trade-induced symmetric increase in wage inequality have abandoned the factor price equalization (FPE) framework. The present…

Abstract

Most models attempting to give an account of trade-induced symmetric increase in wage inequality have abandoned the factor price equalization (FPE) framework. The present chapter retains the FPE framework and identifies a plausible route through which trade might increase wage inequality in all trading countries. A two-sector model with one constant returns sector producing basic goods and another increasing returns to scale sector producing fancy goods is developed. A quasi-linear utility function is used to capture the divide between basic and fancy goods. There are two types of productive factors, skilled and unskilled labour, and they differ with respect to their occupational options. Skilled labour can work both in the skill using fancy goods sector and in the unskilled labour using basic good producing sector, whereas unskilled labour is tied down to unskilled job. The model holds possibilities of multiple equilibria and under reasonable parameterization skill premium increases in all countries following trade.

Details

Contemporary and Emerging Issues in Trade Theory and Policy
Type: Book
ISBN: 978-1-84950-541-3

Keywords

To view the access options for this content please click here
Book part
Publication date: 2 June 2008

Abstract

Details

Contemporary and Emerging Issues in Trade Theory and Policy
Type: Book
ISBN: 978-1-84950-541-3

1 – 2 of 2