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Journal of Economic Integration 2015 September;30(3) :577-590.
DOI: https://doi.org/10.11130/jei.2015.30.3.577
Globalization, International Factor Mobility, and Wage Inequality
Shigemi Yabuuchi 
Aichi University, Nagoya, Japan
Corresponding Author: Shigemi Yabuuchi ,Tel: +81 561745760, Fax: +81 561745760, Email: yabuuchi@aichi-u.ac.jp
Copyright ©2015 Journal of Economic Integration
ABSTRACT
The international movement of economic factors such as capital and skilled labor has complex effects on the economies involved, especially when multiple factors move at the same time. One important effect is the potential change in wage inequality between skilled and unskilled labor—particularly, in developing countries that have agreed to trade with developed countries. This study considers a small open economy with two goods and three factors to determine whether wage inequality increases or decreases due to increased movement of these factors. The key findings are that wage inequality can unambiguously increase and decrease, under certain circumstances regarding the capital intensity of the sector(s), the initial amount of foreign factors, and the shares of factors in national income.

JEL Classification
F15: Economic Integration
F16: Trade and Labor Market Interactions
F22: International Migration
R23: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
Keywords: International Factor Mobility | Wage Inequality | Unemployment
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