Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/93002 
Year of Publication: 
2012
Series/Report no.: 
IAI Discussion Papers No. 219
Publisher: 
Georg-August-Universität Göttingen, Ibero-America Institute for Economic Research (IAI), Göttingen
Abstract: 
This paper presents a way to explore how macroeconomic shifts cause inequality changes. It is based on the backwardness observed in the agricultural sector in rural areas. It shows why highly dualistic economies tend to be more unequal than economies with flexible and integrated labour markets. Assuming that an inter-sectorial wage gap exists, this methodology allows control over the direct impact on inequality changes caused by macroeconomic changes that affects the relative competitiveness between the tradable and non-tradable sectors. The methodology aims to find the wage gap change (in log units) taking place between two points in time, which is not dependent on the distribution of endowments of the employed population (observed and unobserved characteristics). The decomposition methodology here proposed shows to be consistent under few assumptions (log normal distribution of earnings and inter-sectorial stochastic dominance) and was tested using real and simulated data. The procedure supports the conclusions by Devillanova et al. (2010) suggesting a channel through which trade integration can affect the wage inequality in a context of capital-skill complementarity and imperfect mobility of workers. The main conclusion of this paper is that duality is a source of inequality. Therefore, policies oriented to eliminate the systematic backwardness appear to be highly desirable in such economies.
Subjects: 
Inequality
Decomposition
Wage-gap
Tradable and Non-tradable sectors
Micro-econometric Simulations
JEL: 
D63
C15
Document Type: 
Working Paper

Files in This Item:
File
Size
245.48 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.