Liberalization, the wage Differential, and Capital-Skill Complementarity: A CGE Analysis
This paper studies how capital-skill complementarity affects the wage differential and economic growth caused by liberalization using a CGE model. It finds that capital-skill complementarity affects the changes caused by liberalization, especially when capital accumulation is considered. The wage differential will be amplified by capital-skill complementarity in all regions. As for GDP, capital-skill complementarity has a positive influence in capital-outflow countries, but a negative influence in capital-inflow countries within plausible ranges of parameter values. These findings may have some political implications for developing countries.
Key wordsLiberalization Wage Differential Capital-Skill Complementarity CGE
JEL ClassificationF16 F17 D58
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