International factor mobility, monopolistic competition, and wage inequality

Jiancai Pi*, Yu Zhou, Jun Yin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)


This paper introduces monopolistic competition into two-sector general equilibrium models to investigate the impacts of international factor mobility on the skilled-unskilled wage inequality. The basic model shows that the change of skilled-unskilled wage inequality is determined by the comparison of the capital-labor distributive shares between the two sectors. The extended model finds that when the output of the monopolistically competitive sector is non-tradable, the mechanism in the basic model fails to work. Thus, we should pay special attention to the role that the non-tradable feature of final-good production plays. In addition, the welfare effects of an FDI inflow are also examined by the basic and extended models.

Original languageEnglish
Pages (from-to)326-332
Number of pages7
JournalEconomic Modelling
Publication statusPublished - 2013 Jul 1
Externally publishedYes


  • FDI
  • Monopolistic competition
  • Skilled immigration
  • Unskilled immigration
  • Wage inequality

ASJC Scopus subject areas

  • Economics and Econometrics


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