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Labour mobility and wage inequality in the presence of endogenous foreign investment
Journal article   Peer reviewed

Labour mobility and wage inequality in the presence of endogenous foreign investment

Sajid Anwar and John Lewis Rice
Economic Modelling, Vol.26(6), pp.1135-1139
2009
url
https://doi.org/10.1016/j.econmod.2009.04.007View
Published Version

Abstract

wage inequality foreign investment labour inflow welfare
This paper examines the impact of labour mobility and increased competition on skilled-unskilled wage inequality and foreign investment. Unlike the existing literature this paper considers a model where foreign investment is endogenously determined. The paper shows that in the shortrun, inflow of either skilled or unskilled labour has no effect on wage inequality but increased competition increases wage inequality. Inflow of either type of labour increases foreign investment but the impact of increased competition on foreign investment cannot be unambiguously determined. Inflow of skilled labour increases wage inequality in the longrun and its effect on foreign investment is positive. Increased competition in the longrun increases wage inequality, foreign investment and welfare.

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