Abstract
There is a link between rural-urban remittances and wage inequality. However, the existing literature sheds little light on this topic. In this study, we establish a three-sector general equilibrium model to investigate the effects of rural-urban migrants’ remittances on wage inequality. Further, we use Chinese macroeconomic data to calibrate the parameters and conduct analysis with numerical simulation. We find that, when rural-urban migrants raise their remittance rate, wage inequality between skilled labour and the urban formal sector remains unchanged in the sector-specific capital case but narrows in the sector-mobile capital case. Moreover, in the sector-specific case, skilled and unskilled wage inequalities, w<sub>SY</sub> and w<sub>SZ</sub>, decrease at the same rate as the urban-rural wage inequalities, w<sub>XY</sub> and w<sub>XZ</sub>, respectively. In the mobile case, however, the former declines faster than the latter.
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