Endogenous Factor Market Distortion, Risk Aversion, and International Trade Under Input Uncertainty

Posted: 26 Oct 2000

See all articles by Hamid Beladi

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics

Nancy H. Chau

Cornell University - School of Applied Economics and Management; IZA Institute of Labor Economics

Abstract

In the context of non-diversifiable and sector-specific risks in labour markets, we show that the resulting factor market distortion - attributable to an endogenous intersectoral wage differential - can provide a possible rationale that explains why larger wage dispersion prevails in developing nations. We also demonstrate how endogenous wage distortions spill over to capital markets, with capital-poor economies offering lower rates of returns. In addition, we show that inequality in the distribution of wealth further deviates factor allocation away from first-best and impairs intersectoral mobility of the poor.

JEL Classification: F10

Suggested Citation

Beladi, Hamid and Chau, Nancy H., Endogenous Factor Market Distortion, Risk Aversion, and International Trade Under Input Uncertainty. Canadian Journal of Economics, Vol. 33, Issue 2, May 2000. Available at SSRN: https://ssrn.com/abstract=238573

Hamid Beladi (Contact Author)

University of Texas at San Antonio - College of Business - Department of Economics ( email )

One UTSA Circle
P.O. Box 5636
San Antonio, TX 78249
United States
210-458-7038 (Phone)
210-458-7040 (Fax)

Nancy H. Chau

Cornell University - School of Applied Economics and Management ( email )

Ithaca, NY 14853
United States
607-255-4463 (Phone)
607-255-9984 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Abstract Views
571
PlumX Metrics