Taxation of labour, product varieties and skilled-unskilled wage inequality: short run versus long run

Sun, Sizhong, and Anwar, Sajid (2015) Taxation of labour, product varieties and skilled-unskilled wage inequality: short run versus long run. International Review of Economics & Finance, 38. pp. 250-257.

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Abstract

In a three-sector general equilibrium model, we examine the impact of a partial tax on labour on skilled unskilled wage inequality. We find that a tax on labour in industrial sector increases skilled unskilled wage inequality in the short run and can have the opposite effect in the long run. A tax on labour in the services sector reduces skilled unskilled wage inequality in both the short run and long run. Furthermore, the introduction of a tax on labour in agricultural sector has no effect on the skilled wage but reduces the unskilled wage. Accordingly, such a tax increases skilled unskilled wage inequality in both the short run and long run.

Item ID: 42024
Item Type: Article (Research - C1)
ISSN: 1873-8036
Keywords: skilled-unskilled wage inequality; partial tax on labour; product varieties; monopolistic competition
Date Deposited: 08 Dec 2015 18:37
FoR Codes: 14 ECONOMICS > 1402 Applied Economics > 140211 Labour Economics @ 40%
14 ECONOMICS > 1402 Applied Economics > 140209 Industry Economics and Industrial Organisation @ 60%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9102 Microeconomics > 910208 Micro Labour Market Issues @ 100%
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