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Climate change and wage inequality

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  • Jiancai Pi

    (Nanjing University)

  • Yuhan Luo

    (Nanjing University)

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.

Suggested Citation

  • Jiancai Pi & Yuhan Luo, 2024. "Climate change and wage inequality," Journal of Economics, Springer, vol. 143(3), pages 279-303, December.
    • Handle: 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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    More about this item

    Keywords

    Climate change; Wage inequality; General equilibrium approach; Agricultural equipment sector;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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