Abstract
By making use of a simple general-equilibrium model of a small open economy, this paper examines the link between labour mobility and the size of wage inequality in the presence of productive public infrastructure. The paper shows that the provision of public infrastructure plays an important part in determining the size of labour inflow induced wage inequality. Specifically, this paper shows that, irrespective of the relative factor intensities, a small inflow of either skilled or unskilled labour does not affect the size of wage inequality if private industries derive equal benefit from public infrastructure provision. A small inflow of skilled (unskilled) labour increases (decreases) wage inequality if skilled (unskilled) labour intensive industry derives more benefit from public infrastructure.