Institutional quality and skilled-unskilled wage inequality

Jiancai Pi, Yu Zhou*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

35 Citations (Scopus)


This paper establishes two-sector general equilibrium models in the presence of unproductive activities to investigate how an improvement of the institutional quality influences the skilled-unskilled wage inequality. We find that an improvement of the institutional quality will affect the interest rate, and then the interest rate combining with the capital intensity will generate an impact on the skilled-unskilled wage inequality. Specifically, both the interest rate and comparisons of the capital-labor relative distributive shares between two sectors play an important role in determining the skilled-unskilled wage gap in an economy featured with unproductive activities. The above results are robust even when we extend the basic theoretical model in several different ways.

Original languageEnglish
Pages (from-to)356-363
Number of pages8
JournalEconomic Modelling
Publication statusPublished - 2013 Sept 1
Externally publishedYes


  • D73
  • General equilibrium model
  • Institutional quality
  • J31
  • O12
  • Skilled-unskilled wage inequality

ASJC Scopus subject areas

  • Economics and Econometrics


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