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Foreign capital, public infrastructure, and wage inequality in developing countries

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  • Pi, Jiancai
  • Zhou, Yu

Abstract

We establish four-sector general equilibrium models to investigate how an inflow of foreign capital influences the skilled–unskilled wage inequality in the presence of the endogenous public infrastructure provision. In the situation of the pure public infrastructure provision, the change of the skilled–unskilled wage inequality is determined by the comparison of the capital distributive shares in urban sectors. In the case of the semi-public infrastructure provision, the change of the skilled–unskilled wage gap is determined by the factor substitution elasticities in urban sectors. A potential extension is also given and it confirms the robustness of the obtained results.

Suggested Citation

  • Pi, Jiancai & Zhou, Yu, 2014. "Foreign capital, public infrastructure, and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 195-207.
    • Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:195-207
    DOI: 10.1016/j.iref.2013.05.012
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    More about this item

    Keywords

    Pure public infrastructure; Semi-public infrastructure; Foreign capital; Wage inequality;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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