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EnglishThis paper studies the interplay between wage gap and government spending in a small open economy facing a shock in trade policy. We consider a specific factor model with an export sector, which uses skilled labour, and an import-competing sector, which uses unskilled labour. We find the conditions under which there exists an inverse (direct) relation between trade liberalization (protection), which increases (decreases) the skilled-unskilled wage gap, and the level of government expenditure. We also show how either an unbalanced distribution of political bargaining power, or tariff revenue co-financing public spending may break this direct relation. Moreover, either progressive or regressive tax regimes may influence the results.
| Titolo: | Trade Tariff, Wage Gap and Public Spending |
| Autori: | |
| Data di pubblicazione: | 2020 |
| Rivista: | |
| Abstract: | This paper studies the interplay between wage gap and government spending in a small open economy facing a shock in trade policy. We consider a specific factor model with an export sector, which uses skilled labour, and an import-competing sector, which uses unskilled labour. We find the conditions under which there exists an inverse (direct) relation between trade liberalization (protection), which increases (decreases) the skilled-unskilled wage gap, and the level of government expenditure. We also show how either an unbalanced distribution of political bargaining power, or tariff revenue co-financing public spending may break this direct relation. Moreover, either progressive or regressive tax regimes may influence the results. |
| Handle: | http://hdl.handle.net/11587/439532 |
| Appare nelle tipologie: | Articolo pubblicato su Rivista |
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