REGULAR ARTICLE
Factor-biased public infrastructure and wage inequality
Jiancai Pi,
Pengqing Zhang,
Corresponding Author
Jiancai Pi
Department of Economics, Nanjing University, Nanjing, P. R. China
Correspondence
Jiancai Pi, Department of Economics, Nanjing University, 22 Hankou Road, Nanjing 210093, P. R. China.
Email: [email protected]
Search for more papers by this authorPengqing Zhang
Department of Economics, Nanjing University, Nanjing, P. R. China
Search for more papers by this authorJiancai Pi,
Pengqing Zhang,
Corresponding Author
Jiancai Pi
Department of Economics, Nanjing University, Nanjing, P. R. China
Correspondence
Jiancai Pi, Department of Economics, Nanjing University, 22 Hankou Road, Nanjing 210093, P. R. China.
Email: [email protected]
Search for more papers by this authorPengqing Zhang
Department of Economics, Nanjing University, Nanjing, P. R. China
Search for more papers by this authorFunding Information:
The National Social Science Foundation in China; Grant/Award Number: 16BJY080.
Abstract
This paper analyzes how factor-biased public infrastructure affects the skilled–unskilled wage inequality. In the basic model with a full employment economy, we find that when the weighted dependence of skilled labor and capital in the urban skilled sector on public infrastructure is large enough relatively to that of unskilled labor and capital in the urban unskilled sector, the wage inequality will be expanded. We also discuss labor-biased and capital-biased public infrastructure in our framework, and find that the relative dependences of relevant labor or capital on public infrastructure are important determinants of wage inequality. In the extended models, we analyze separately the issue of wage inequality in the economy with unemployment and the totally open capital market, and find the results of the basic model almost still hold.
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