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AA00260492-20150000-0085.pdf
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Wage inequality, imitation and social institutions : a theoretical analysis
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Dutta, Priya Brata
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Economics and politics department, Visva-Bharati University
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Keio Economic Society, Keio University
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2015
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Keio economic studies
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51
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2015
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85
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110
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The paper develops a four sector closed economy model with two primary factors- skilled labour and unskilled labour. One of the two production sectors produces varieties of innovated products and the other sector imitates those innovated products and produces with unskilled labour as the only input. A R&D sector develops blueprints of new products using skilled labour as the only input. We here introduce endogenous imitation and assume that a social institution has control over this endogenous imitation. This social institution produces an imitation preventing public good with skilled labour as the only input. It is shown that an increase in skilled (unskilled) labour endowment raises (has no effect on) the rate of growth and raises (lowers) the skilled-unskilled wage ratio. However, an improvement in the imitation preventing efficiency of the public good raises the skilled-unskilled wage ratio though it has no effect on growth rate. A change in skilled labour endowment or a change in unskilled labour endowment has no effect on the imitation rate. However, an improvement in the imitation prevention efficiency of the public good lowers the imitation rate. We also analyse the effects of change in different parameters on the level of social welfare.
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