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Open Economies Review

, Volume 30, Issue 5, pp 933–945 | Cite as

International Capital Flows, Land Conversion and Wage Inequality in Poor Countries

  • Sugata Marjit
  • Saibal KarEmail author
Research Article
  • 68 Downloads

Abstract

Conversion of land from agricultural to industrial use has met with strong opposition in many developing countries in recent times. A number of relevant papers study welfare effects associated with willful conversion, no conversion or politically forced and manipulated conversion of land into other activities. No study, however, deals with the evolving skilled-unskilled wage gap consequent upon full or partial convertibility of land in the short and the long run. This paper shows that in a multiple-commodity world with land as a crucial input both for agriculture and industry, an influx of capital for supporting industrial production must widen the skilled-to-unskilled wage gap. If the rate of conversion of land exceeds a critical value in the short-run, the wage gap rises. Even in the long run, possibility of full conversion can raise the wage gap if agriculture is—as is indeed the case—labor-intensive in developing countries. Showing the dependence of wage inequality on the degree to which land is convertible into other uses is the paper’s unique contribution to the literature.

Keywords

Land use Industry Skill Wage inequality Developing countries 

JEL Classifications

D33 D58 F21 J31 

Notes

Acknowledgements

The authors thank an anonymous reviewer for very helpful comments. The usual disclaimer applies.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Centre for Studies in Social SciencesCalcuttaIndia
  2. 2.Centre for Studies in Social Sciences, Calcutta, Indiaand IZABonnGermany

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