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Rural dual economics, subsidy policy and the income inequality between skilled and unskilled workers

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  • Zheyu Dong
  • Xiaochun Li

Abstract

This paper builds a general-equilibrium model with three sectors to study the effects of several modern-agricultural factor price subsidy policies on the income inequality between skilled and unskilled labour. We find that all types of price subsidies, including on skilled labour, unskilled labour and capital, enlarge the income inequality if capital is sector-specific, while they decrease this gap if capital moves freely between sectors. Moreover, to what extent the income gap would be altered depends on the ratio of factor income to total output, and we also find that the urban unemployment decreases under certain conditions regardless of capital mobility.

Suggested Citation

  • Zheyu Dong & Xiaochun Li, 2019. "Rural dual economics, subsidy policy and the income inequality between skilled and unskilled workers," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 26(5), pages 609-621, September.
    • Handle: RePEc:taf:raaexx:v:26:y:2019:i:5:p:609-621
    DOI: 10.1080/16081625.2017.1363656
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    Cited by:

    1. Dianshuang Wang & Xiaochun Li, 2022. "Capital market distortion, agricultural producer service and wage inequality in the small-scale agriculture," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(2), pages 391-409, October.

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