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Journal of Economic Integration 2011 September;26(3) :578-599.
Globalization, Labour Market Segmentation, Unemployment and Wage Inequality: A Theoretical Analysis

Rakhi Banerjee Ranjanendra Narayan Nag 

Gurudas College, Kolkata
St. Xavier's College
Copyright ©2011 Journal of Economic Integration

In this paper we build up a three-sector general equilibrium framework to examine impact of agricultural trade liberalization, tariff rate restructuring and inflow of Foreign Direct Investment on unemployment and wage inequality in an emerging market economy. The paper shows that agricultural trade liberalization and tariff rate restructuring reduces the skilled-unskilled wage gap whereas increase in inflow of foreign capital may lead to worsening of income distribution. Multiple cross effects, factor specificity and factor intensity ranking play important roles in determining changes in output composition, factor rewards and unemployment in the wake of economic reforms.

JEL Classification: F16, F21

Keywords: Economic Reforms | Efficiency Wage and Unemployment
1. Agell, J., Lundborg P. (1992), "Fair wages, involuntary unemployment and tax policy in the simple general equilibrium model", Journal of Public Economics, 47, pp. 299-320.
2. Agell, J., Lundborg, P. (1995), "Fair wages in the open economy, Economica", 62, pp. 325-351.
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