Skill formation, environmental pollution, and wage inequality

  • Pengqing ZhangEmail author
Original Paper


This paper studies the effects of government-led skill formation on environmental quality and the skilled–unskilled wage gap through the three-sector general equilibrium approach. The process of skill formation is divided into two periods. In the basic model, an increase in the subsidy on skill formation can improve the environment in both periods, but may widen or narrow down the wage gap, depending on the relative capital intensities of the urban sectors, and on the environmental dependence of the rural sector. In the presence of urban unemployment, the main results of the basic model still more or less hold. This paper suggests that, although the subsidy on skill formation does not necessarily reduce wage inequality, it does serve as an effective policy to improve environmental quality.

JEL Classification

H52 J31 Q56 



  1. Acemoglu D (2002) Technical change, inequality, and the labor market. J Econ Lit 40(1):7–72CrossRefGoogle Scholar
  2. Autor DH (2014) Skills, education, and the rise of earnings inequality among the “other 99 percent”. Science 344(6186):843–851CrossRefGoogle Scholar
  3. Barro R (2001) Human capital and growth. Am Econ Rev 91(2):12–17CrossRefGoogle Scholar
  4. Beladi H, Chaudhuri S, Yabuuchi S (2008) Can international factor mobility reduce wage inequality in a dual economy? Rev Int Econ 16(5):893–903Google Scholar
  5. Beladi H, Chakrabarti A, Marjit S (2010) Skilled-unskilled wage inequality and urban unemployment. Econ Inq 48(4):997–1007CrossRefGoogle Scholar
  6. Beladi H, Marjit S, Broll U (2011) Capital mobility, skill formation and polarization. Econ Model 28(4):1902–1906CrossRefGoogle Scholar
  7. Beladi H, Liu L, Oladi R (2013) On pollution permits and abatement. Econ Lett 119(3):302–305CrossRefGoogle Scholar
  8. Chaudhuri S (2008) Wage inequality in a dual economy and international mobility of factors: do factor intensities always matter? Econ Model 25(6):1155–1164CrossRefGoogle Scholar
  9. Chaudhuri S (2014) Foreign capital, non-traded goods and welfare in a developing economy in the presence of externalities. Int Rev Econ Finance 31:249–262CrossRefGoogle Scholar
  10. Chaudhuri S, Mukhopadhyay U (2009) Revisiting the informal sector: a general equilibrium approach. Springer, New YorkGoogle Scholar
  11. Chaudhuri S, Kumar Dwibedi J, Biswas A (2017) Subsidizing healthcare in the presence of market distortions. Econ Model 64:539–552CrossRefGoogle Scholar
  12. Chaudhuri S, Ghosh A, Banerjee D (2018) Can public subsidy on education necessarily improve wage inequality? Int Rev Econ Finance 54:165–177CrossRefGoogle Scholar
  13. Copeland BR, Taylor MS (1999) Trade, spatial separation, and the environment. J Int Econ 47(1):137–168CrossRefGoogle Scholar
  14. Dixit A (1986) Comparative statics for oligopoly. Int Econ Rev 27(1):107–122CrossRefGoogle Scholar
  15. Fortin NM, Lemieux T (1997) Institutional changes and rising wage inequality: is there a linkage? J Econ Perspect 11(2):75–96CrossRefGoogle Scholar
  16. Gupta MR, Dutta PB (2010) Skilled–unskilled wage inequality, nontraded good and endogenous supply of skilled labour: a theoretical analysis. Econ Model 27(5):923–934CrossRefGoogle Scholar
  17. Gustke C (2016) Pollution crisis is choking the Chinese economy. CNBC News ReportGoogle Scholar
  18. Harris JR, Todaro MP (1970) Migration, unemployment and development: a two-sector analysis. Am Econ Rev 60(1):126–142Google Scholar
  19. Heckman JJ (2006) Skill formation and the economics of investing in disadvantaged children. Science 312(5782):1900CrossRefGoogle Scholar
  20. Jones RW (1965) The structure of simple general equilibrium models. J Polit Econ 73(6):557–572CrossRefGoogle Scholar
  21. Jones RW (1971) A three factor model in theory, trade, and history. In: Bhagwati JN, Jones RW, Mundell RA, Vanek J (eds) Trade, balance of payments and growth: papers in international economics in honor of Charles P. Kindleberger. North-Holland, Amsterdam, pp 3–21Google Scholar
  22. Kar S, Guha-Khasnobis B (2006) Economic reform, skill formation and foreign capital. World Econ 29(1):79–94CrossRefGoogle Scholar
  23. Keen MJ, Kotsogiannis C (2004) Tax competition in federations and the welfare consequences of decentralization. J Urban Econ 56(3):397–407CrossRefGoogle Scholar
  24. Kondoh K, Yabuuchi S (2012) Unemployment, environmental policy, and international migration. J Int Trade Econ Dev 21(5):677–690CrossRefGoogle Scholar
  25. Lu Y, Song S, Wang R, Liu Z, Meng J, Sweetman AJ, Jenkins A, Ferrier RC, Li H, Luo W, Wang T (2015) Impacts of soil and water pollution on food safety and health risks in China. Environ Int 77:5–15CrossRefGoogle Scholar
  26. Marjit S, Acharya R (2003) International trade, wage inequality and the developing economy: a general equilibrium approach. Springer, HeidelbergCrossRefGoogle Scholar
  27. Oladi R, Beladi H (2015) On foreign aid, pollution and abatement. Environ Dev Econ 20(6):797–812CrossRefGoogle Scholar
  28. Oladi R, Gilbert J (2011) Monopolistic competition and North-South trade. Rev Int Econ 19(3):459–474CrossRefGoogle Scholar
  29. Pan L (2014) The impacts of education investment on skilled–unskilled wage inequality and economic development in developing countries. Econ Model 39:174–181CrossRefGoogle Scholar
  30. Pan L, Zhou Y (2013) International factor mobility, environmental pollution and skilled-unskilled wage inequality in developing countries. Econ Model 33:826–831CrossRefGoogle Scholar
  31. Pi J, Zhang P (2017) Foreign capital, pollution control, and wage inequality in developing countries. Int Rev Econ Finance 48:280–288CrossRefGoogle Scholar
  32. Pi J, Zhang P (2018) Horizontal mergers and wage inequality. J Inst Theor Econ 174(3):495–513CrossRefGoogle Scholar
  33. Pi J, Zhou Y (2012) Public infrastructure provision and skilled-unskilled wage inequality in developing countries. Labour Econ 19(6):881–887CrossRefGoogle Scholar
  34. Pi J, Zhou Y (2015) The impacts of corruption on wage inequality and rural–urban migration in developing countries. Ann Reg Sci 54(3):753–768CrossRefGoogle Scholar
  35. Tawada M, Nakamura A (2009) Environment and the Harris and Todaro paradoxes. In: Kamihigashi T, Zhao L (eds) International trade and economic dynamics: essays in memory of Koji Shimomura. Springer, Berlin, pp 87–99CrossRefGoogle Scholar
  36. Tawada M, Sun S (2010) Urban pollution, unemployment and national welfare in a dualistic economy. Rev Dev Econ 14(2):311–322CrossRefGoogle Scholar
  37. Xie Y, Zhou X (2014) Income inequality in today’s China. Proc Natl Acad Sci 111:6928–6933CrossRefGoogle Scholar
  38. Yabuuchi S, Chaudhuri S (2009) Skill formation, capital adjustment cost and wage inequality. Rev Urban Reg Dev Stud 21(1):2–13CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Economics, School of BusinessNanjing UniversityNanjingPeople’s Republic of China

Personalised recommendations