ECONOMIC RESEARCH CENTERDISCUSSION PAPER
E-Series

No.E16-8

The Impacts of Agricultural Public
Infrastructure on Urban Unemployment andSocial Welfare: A General Equilibrium
Analysisby
Lijun Pan
Makoto Hanazono
NagoyaUniversity
MakotoHANAZONO

October 2016

ECONOMIC RESEARCH CENTERGRADUATE SCHOOL OF ECONOMICSNAGOYA UNIVERSITYThe Impacts of Agricultural Public Infrastructure on Urban Unemployment andSocial Welfare: A General Equilibrium Analysis
Lijun PAN1

Abstract: We establish four-sector general equilibrium models to investigate the impacts ofincreased provision of agricultural public infrastructure on urban unemployment and welfare.
The welfare measurement is based on Sen (1974)’s welfare index. We consider three types ofagricultural public infrastructure, the neutral one, the land-augmenting one, and the laboraugmenting one. The impacts of increased provision of agricultural public infrastructure on
urban unemployment and welfare are determined by the interactions among three effects, the“agricultural productivity effect,” “rural labor employment effect,” and “urban expected wage
effect.” We also identify the impacts on the skilled-unskilled wage inequality.

JEL classification: D 63, H 54, J 64, Q 18
Keywords: agricultural public infrastructure, urban unemployment, welfare, wage inequality

1

School of Economics, Nagoya University, Japan. Email: pan.lijun.nu@gmail.com

1 / 27

1. Introduction
The agricultural (rural) public infrastructure provision is crucial for facilitating ruraldevelopment in developing countries. Using the data from China, India, the Philippines andsome South American countries, Zhang and Fan (2004), Fan and Zhang (2004), Teruel andKuroda (2005), and Pinstrup-Andersen and Shinokawa (2006) have empirically shown that
agricultural public infrastructure, which stimulates agricultural productivity, is essential toregional development and poverty alleviation.
Despite the numerous empirical works that demonstrate a positive link between theprovision of agricultural public infrastructure and agricultural productivity in different
developing countries, few works have examined the impacts of rural agricultural public
infrastructure on urban unemployment and social welfare, which have always been the two big
concerns for the governments of developing countries. Is the increasing provision ofagricultural public infrastructure always beneficial to the developing economy in terms of urban
unemployment and social welfare? This issue motivates us to construct a unified theoreticalframework to investigate how increased provision of agricultural public infrastructure affects
the interactions among different economic sectors and what impacts it brings to urban
unemployment and social welfare.
To fill the current research gap, this paper builds four-sector general equilibrium models
to study how the increased provision of agricultural public infrastructure influences urban
unemployment and welfare. The economy consists of an urban high-skill sector, an urban lowskill sector, an agricultural sector, and a sector to produce agricultural public infrastructure.
Different from most of existing literature 2 , which use national income as the welfare
measurement, we adopt Sen (1974)’s welfare index to measure welfare. Sen’s index contains
two components, per capita labor income and Gini coefficient, thus balancing efficiency andfairness in the welfare measurement. In addition, different types of agricultural public
infrastructure display diversified functions. The construction of roads, irrigation systems andprovision of electricity benefit both rural labor and land; the public provision of advanced
fertilizers and high-tech hybridization seeds typically improves the productivity of rural land;and public training and machines mainly make rural labor more efficient. To fully investigate
the impacts of the agricultural public infrastructure provision, therefore, we divide theagricultural public infrastructure into three types: the neutral one, the land-augmenting one, andthe labor-augmenting one. The neutral agricultural public infrastructure indicates that it
improves the efficiency of all the production factors; the land-augmenting agricultural public
infrastructure benefits rural land only; and the labor-augmenting agricultural public
Represented works include Grinols (1991), Beladi and Marjit (1992), Marjit and Beladi (1996), Gupta (1997) and
Sen et al. (1997).
2

2 / 27

infrastructure only increases the productivity of rural labor. In the basic model, we assume thatthe agricultural public infrastructure is produced by skilled labor, but we relax this assumption
in our extension.
We find that increasing the provision of agricultural public infrastructure does notnecessarily reduce urban unemployment or improve social welfare. The impact of increased
provision of agricultural public infrastructure on urban unemployment is determined by threeeffects, which are the “agricultural productivity effect,” the “rural labor employment effect,”
and the “urban expected wage effect.” The “agricultural productivity effect” arises from theincrease in the productivity of agricultural production factors; the “rural labor employment
effect” is generated by the change in the labor employment in the agricultural sector; and the“urban expected wage effect” stems from the change in the expected wage rate of the urban
low-skill sector. When the agricultural public infrastructure is neutral or land-augmenting, the“agricultural productivity effect” and the “rural labor employment effect” help reduce urban
unemployment by sticking unskilled labor to the rural area, while the “urban expected wage
effect” may potentially increase urban unemployment by attracting unskilled labor to move tothe urban area. Therefore, urban unemployment falls if the “agricultural productivity effect”
and the “rural labor employment effect” dominate the “urban expected wage effect,” and rises
otherwise. When the agricultural pubic infrastructure is labor-augmenting, the “agricultural
productivity effect” may reduce the unskilled labor’s willingness to stay in the rural area,
depending on the agricultural wage elasticity of an efficient unit labor employment. The impact
on welfare is also determined by the interactions of these three effects, and the intuition issimilar. We also examine the impact on skilled-unskilled wage inequality and conduct several
extensions to testify the generality of our findings. In the extended models, we find that if the
agricultural public infrastructure is produced by unskilled labor or is provided in alternative
ways (e.g., instead of constructing public infrastructure, the government procures the public
services from the private sectors), the main findings of the basic models are still valid.
The present work contributes to the current literature in the following aspects. The firstand main related strand of literature is the study on public infrastructure. Representative
literature can be referred to Gupta (1997), Anwar (2001, 2006, 2009a, 2009b) and Pi and Zhou
(2012, 2014). These studies either consider the relations between urban public infrastructure
and international trade (Anwar, 2001), or demonstrate the relation among urban public
infrastructure provision, social welfare and wage inequality (Anwar, 2006, 2009a, 2009b; Pi
and Zhou, 2012, 2014). However, none of these studies considers the impact on urban
unemployment and welfare, especially the welfare measured with wage inequality. The present
paper complements this strand of literature by providing a theoretical framework to analyze
these neglected but important issues. The second strand of literature focuses on evaluating the

3 / 27

policy impacts on urban unemployment and welfare. Exemplified studies include Beladi andNaqvi (1988), Grinols (1991), Chao and Yu (1992), Gupta (1993, 1994, 1995), Chaudhuri (2000,
2006, 2007), Beladi and Chao (2006), Zenou (2011) and Pi and Zhou (2015a). These papers
mainly focus on how the development polices (e.g., subsidy policies, institutional changes,
trade policies and environment policies) and endowment growth (e.g., the increased labor andcapital endowments) affect urban unemployment and welfare. Nevertheless, none of them looks
into the impact of agricultural public infrastructure. We contribute to this strand of literature byproviding a new policy evaluation on urban unemployment and welfare. Third, the present
paper also studies the relation between the provision of agricultural public infrastructure andskilled-unskilled wage inequality in developing countries, which has not been examined by thetheoretical studies on the skilled-unskilled wage inequality in dual economies, such as Beladi
et al. (2008), Chaudhuri and Yabuuchi (2007), Yabuuchi and Chaudhuri (2007), Chaudhuri(2008), Beladi et al. (2010) Pi and Zhou (2012, 2014) and Pan (2014). We fill such a research
gap and find that increasing the provision of neutral or land-augmenting agricultural public
infrastructure would mitigate the growing wage inequality in developing countries, while theincreased provision of labor-augmenting agricultural public infrastructure may widen the wagegap.
The rest of this paper is organized as follows. In Section 2, we construct the basic modeland consider the case where only skilled labor is employed in the agricultural public
infrastructure production. In Section 3, we do the comparative static analysis on different typesof agricultural public infrastructure. In Section 4, we extend the basic model by considering theemployment of unskilled labor in the public sector, an alternative way to provide theagricultural public infrastructure and a different taxation scheme to finance the agricultural
public infrastructure. Section 5 provides concluding remarks and policy implications.
2. The model
Consider a small open economy consisting of four sectors, an urban high-skill sector, anurban low-skill sector, a public sector and an agricultural sector. The urban high-skill sector
employs skilled labor and capital as factors of production to produce the import-competingproduct. The urban low-skill sector uses unskilled labor and capital to produce the exportable
good. For analytical simplicity, we assume that the public sector only employs skilled labor to
supply the public infrastructure that enhances agricultural production3. Being non-tradeable,
the public infrastructure typically includes the high-tech public infrastructure and advanced
One may argue that the public sector can also produce the public infrastructure for urban production. However,since our methodology is the comparative static analysis, such a situation can be ignored or alternatively said, wejust assume that the public sector provides a fixed amount of public good for urban production. Pi and Zhou (2012,2014) assume that the public sector only provides the urban public infrastructure, while ignoring that it can also
produce the agricultural public infrastructure.
3

4 / 27

agricultural production technology introduced by the employed skilled labor 4 . The cost ofproviding agricultural public infrastructure is financed by taxation on capital via per-capital tax(Alternative ways to finance the agricultural public infrastructure can be referred to the sectionof Extension and Discussion.). The agricultural sector employs unskilled labor and land to
produce the exportable product. Besides, the agricultural production also depends on theprovision of agricultural public infrastructure. More agricultural public infrastructure raises the
productivity of the agricultural sector. Capital can freely flow between the urban low-skill andhigh-skill sectors. Skilled labor can freely move between the urban high-skill and public sectors.
The wage rate of the agricultural sector is fully flexible, whereas the unskilled labor employedin the urban area is usually protected by the minimum wage act. Since the minimum wage is
generally higher than the competitive wage, there exists unemployment of unskilled labor in
the urban area. Similar to Beladi et al. (2008), Chaudhuri (2008), Beladi et al. (2010) and Pi
and Zhou (2012, 2014), we assume that urban unemployment only exists among unskilled labor.
All factor and good markets are perfectly competitive. Throughout the paper, we treat the
product of the urban low-skill sector as the numeraire.
The production functions of the urban low-skill and high-skill sectors are given by:
X  F X ( LUX , K X ) ,(1)

Y  F Y ( LSY , KY ) ,(2)

where X and Y are the outputs of the urban low-skill and high-skill sectors, respectively;

LUX and LSY are the unskilled and skilled labor employed in the urban low-skill and high-skill
sectors, respectively; K X and KY are the capital utilized by the urban low-skill and highskill sectors, respectively; F X and F Y represent the production functions of urban low-skill
and high-skill sectors, both of which are strictly quasi-concave and linearly homogenous withrespect to labor and capital.
The profit maximization conditions yield
FLX ( LUX , K X )  w ,(3)

FKX ( LUX , K X )  r  t ,(4)

pY FLY ( LSY , KY )  wS ,(5)

pY FKY ( LSY , KY )  r  t ,(6)where pY represents the relative price of the urban high-skill sector’s output; w and wS
are the urban minimum wage rate and the wage rate of the skilled labor employed by the urban

The Extension and Discussion part provides more discussions about alternative ways to provide agricultural public
infrastructure.
4

5 / 27

high-skill sector, respectively; r is the interest rate of capital; and t is the per-capital tax
charged by the government. Here Fji  F i j ( i  X , Y , andj  L, K ).

The public sector’s production function is as follows:
R  F P ( LSR ) .

(7)

where R is the amount of agricultural public infrastructure; LSR is the skilled labor employedby the public sector; F P is the production function, with the property of FL P  0 and

FLL P  0 . Each skilled labor employed in this sector earns the wage of wS .
The budget balance of public infrastructure provision implies

wS LSR  tK .

(8)

Now we introduce the provision of the agricultural public infrastructure to the agricultural
production function. In particular, the agricultural public infrastructure may be neutral, landaugmenting or labor augmenting to the agricultural production.
First, we consider the case when the agricultural public infrastructure is neutral, that is,
the public infrastructure increases the productivity of all production factors. Specifically, theagricultural production function takes the following form:A  g ( R ) F A ( LUA , T ) ,(9a)where A is the output of the agricultural sector; LUA and T are the unskilled labor and land
employed in the agricultural sector. The relation between the neutral agricultural public
infrastructure

R and the agricultural productivity is described by g , which satisfies

g (0)  1 , g   0 and g   0 . The agricultural production function is F A , satisfying strict
quasi-concavity and linear homogeneity with respect to labor and land. Equation (9a) is
typically used to introduce the neutral public infrastructure into the production function (see Pi
and Zhou, 2012, 2014, 2015a).
The profit maximization condition yields
pA g ( R ) FLA ( LUA , T )  wA ,(10a)pA g ( R ) FTA ( LUA , T )   ,(11a)where p A represents the relative price of the agricultural sector’s output; wA and  are thewage rate of the unskilled labor employed by the agricultural sector and the return rate of land,
respectively; FjA  F A j ( j  L, T ).
Apart from being neutral, the agricultural public infrastructure can be factor-augmenting,that is, only some specific factor benefits from the public infrastructure. For instance, if the
agricultural public infrastructure is a kind of advanced fertilizer or some high-tech hybridization

6 / 27

seeds, it only increases the productivity of land. In some other circumstances, the agricultural
public infrastructure may be advanced agricultural machines or some professional training,which only increases the productivity of rural unskilled labor. When the agricultural public
infrastructure is land-augmenting, equations (9a) to (11a) will be restated as
A  F A ( LUA , g ( R )T ) ,(9b)

pA FLA ( LUA , g ( R )T )  wA ,(10b)

pA g ( R ) FTA ( LUA , g ( R )T )   .

(11b)

When the agricultural public infrastructure is labor-augmenting, equations (9a) to (11a)will beA  F A ( g ( R ) LUA , T ) ,pA g ( R ) FLA ( g ( R ) LUA , T )  wA ,pA FTA ( g ( R ) LUA , T )   .

(9c)
(10c)
(11c)

The factor market clearing conditions are given by
LSY  LSR  LS ,(12)

LUN  LUX  LUA  LU ,(13)

K X  KY  K ,(14)

T T .

(15)

where LUN is the urban unemployment; LS , LU ,K and T are the endowments ofskilled labor, unskilled labor, capital and land, respectively.
In this paper, we assume that the migration of unskilled labor from the rural to the urban
area satisfies the Harris-Todaro rural-urban migration equilibrium condition (Harris and Todaro,1970) 5:

wA 

LUX
w.
LUX  LUN

(16)

which indicates that the unskilled rural migrants will continue to transfer to the urban area until
the agricultural wage rate ( wA ) is equal to the expected wage rate of unskilled labor in theurban area (

LUX
w ).
LUX  LUN

We adopt the welfare index from Sen (1974), which is also employed by Gupta (1993) and
Gupta (1995). This index balances the average wage level and the wage distribution among

Such an equilibrium condition is widely used to describe the unskilled rural-urban migration, such as Beladi et al.
(2008), Chaudhuri(2008), Beladi et al. (2010) and Pi and Zhou (2012, 2014).
5

7 / 27

different groups of labor. Sen’s index is positively related to the per capita labor income, but
negatively related to the Gini coefficient, implying that welfare may decrease due to theworsened income dispersion even if per capita labor income increases. Specifically, welfare ismeasured by:

W  E (1  G) .
where W is the welfare level, E ( (17)

LUX w  LUR wA  LS wS) is the per capita wage level, and
LU  LS

G is the Gini coefficient measured by wage income.
Consumers consume the goods of the urban high-skill sector, the urban low-skill sector
and the agricultural sector. This completes the description of the demand side.
Equations (1)-(8), (9a)-(11a) (9b-11b or 9c-11c) and (12)-(16) complete the description of
the supply side, which determines the equilibrium values of X , Y , A , LSY , LSR , LUX , LUA ,LUN , K X , KY , T , wS , wA , r , t and  , given the value of the policy variable(exogenous variable) R and other parameters. Then, by equation (17), we can derive theequilibrium value of W .

3. Comparative static analysis
3.1 Neutral agricultural public infrastructure
In this subsection, our model is composed of (1)-(8), (9a)-(11a) and (12)-(16), which
determine sixteen endogenous variables, namely, X , Y , A , LSY , LSR , LUX , LUA , LUN ,K X , KY , T , wS , wA , r , t and  . The policy variable (exogenous variable) is R , andothers are all parameters.
The following lemma is useful to establish our main results.
Lemma 1: When the government increases the provision of neutral agricultural public
infrastructure:(i) The labor employment in the urban low-skill sector increases;(ii) The wage rate of the agricultural sector increases;(iii) The labor employment of the agricultural sector increases if

pA g FLA 

kY w,
k X ( LU  LUA )and decreases otherwise.

8 / 27Here k X KXKand kY  Y .
LUX
LSY

Proof: See Appendix A-1.

■

The intuition is as follows. By equation (7), an increase in the neutral agricultural public
infrastructure raises the employment of skilled labor in the public sector, hence reducing theskilled labor in the urban high-skill sector. The decreased employment of skilled labor reduces
the marginal productivity of capital in the urban high-skill sector, so capital flows from thehigh-skill sector to the low-skill sector. This leads to an increase in the marginal productivityof unskilled labor in the urban low-skill sector. Owing to the fixed minimum wage, eventually,
the increased capital employment raises the employment of unskilled labor in the urban lowskill sector. This explains Lemma 1-(i). Besides, the increased neutral agricultural public
infrastructure raises the marginal productivity of unskilled labor in the agricultural sector,
leading to an increase in the agricultural wage rate. This demonstrates Lemma 1-(ii).
From Lemma 1-(i) and 1-(ii), we can identify two opposing effects on the agricultural labor
employment. First, Lemma 1-(ii) indicates a positive effect on the rural labor employment
owing to the increase in the productivity of the rural labor. We name this effect the “agricultural
productivity effect,” which is captured by pA g FLA . Second, the rise in the urban unskilledemployment, which raises the expected income of unskilled labor in the urban area, encourages
the transfer of the rural unskilled labor to the urban area. This generates a negative effect onrural labor employment. We call this the “urban expected wage effect”, which is described by

kY w.
k X ( LU  LUA )If the “urban expected wage effect” dominates (is dominated by) the“agricultural productivity effect,” the urban area is more (less) attractive and fewer (more)unskilled labor will work in the agricultural sector. This explains Lemma 1-(iii).
In line with existing literature, such as Beladi et al. (2008), Chaudhuri and Yabuuchi (2007),
Yabuuchi and Chaudhuri (2007), Chaudhuri (2008), Beladi et al. (2010), Pan (2014) and Pi andZhou (2012, 2014, 2015b), throughout the whole paper, we use the difference between the wage
rate of skilled labor and the average wage rate of unskilled labor to describe the skilledunskilled wage inequality. By equation (16), the average wage rate of unskilled labor is wA .
Then, we have:
Corollary 1: The increasing provision of neutral agricultural public infrastructure reduces the
skilled-unskilled wage inequality.
Proof: See Appendix A-2.

■

9 / 27

According to Lemma 1, the increased provision of neutral agricultural public infrastructure
raises the average wage rate of unskilled labor (the agricultural sector’s wage rate). On the other
hand, given the good price of the urban low-skill sector (alternatively, the unit production cost)
and the minimum wage rate, the sum of the interest rate and per-capital tax is determined. Since
the price of the urban high-skill sector’s product is also given and capital can freely move
between the two sectors, the wage rate of skilled labor is independent of the agricultural public
infrastructure provision. Hence, the skilled-unskilled wage inequality is reduced. The fixedskilled labor wage is in line with Marjit et al. (2013), who consider a similar economic structure,i.e., two different sectors (the urban high-skill one and low-skill one) in the urban area withthree production factors (skilled labor, unskilled labor and capital).
Based on Lemma 1, we use Proposition 1 to show how the increased provision of neutral
agricultural public infrastructure affects urban unemployment.
Proposition 1: When the government raises the provision of the neutral agricultural public
infrastructure, urban unemployment falls ifkk ( w  wA )pA g FLA  Y pA gFLLA  Y,
kXk X ( LU  LUA )and rises otherwise.
Proof: See Appendix A-3.

■

The change in urban unemployment depends on the change in the employment of urban
unskilled labor and that in the labor employment in the agricultural sector. From Lemma 1-(i),the employment of unskilled labor rises with the increased provision of agricultural public
infrastructure. In addition, according to Lemma 1-(iii), the labor employment in the agricultural
sector rises if the “urban expected wage effect” is dominated by the “agricultural productivity
effect,” i.e.

kY w
 pA g FLA . In this case, urban unemployment must fall becausek X ( LU  LUA )both the unskilled labor employed in the agricultural sector and that in the urban low-skill sector
increase.
If the “urban expected wage effect” dominates the “agricultural productivity effect”, i.e.

kY w
 pA g FLA , the unskilled labor employment in the agricultural sector decreases.
k X ( LU  LUA )Then urban unemployment may rise when the decrease in the rural unskilled labor employment
outweighs the increase in the unskilled labor employed in the urban low-skill sector. Here we
identify one additional effect, which stems from the change in the agricultural labor
employment. When a unskilled labor decides whether to migrate from the rural area to the urban

10 / 27

area, (s)he needs to take into account the opportunity cost of the rise in the agricultural wage
due to the decrease in the rural labor caused by his (her) migration. We call this effect the “rurallabor employment effect,” which is represented bykY
p A gFLAL . If the “agriculturalkX

productivity effect” and the “rural labor employment effect” are sufficiently weak such thatthe “urban expected wage effect” dominates, i.e., pA g FL AkYk ( w  wA )pA gFLLA  Y,
kXk X ( LU  LUA )then the increased job vacancies in the urban low-skill sector are insufficient to absorb theincrease in the labor transferred from the rural to the urban area, causing a rise in urban
unemployment. If the opposite takes place, urban unemployment is increased because jobs
created in the urban low-skill sector exceed the increase in rural-urban migrants.
Now, let us come to the welfare analysis. Substituting equation (16) into (17), the per capita
wage level E , which represents efficiency, can be expressed by

LU wA  LS wS. As shown in
LU  LS

Corollary 1, the average unskilled wage wA rises and the skilled wage wS does not change.
Consequently, E always rises with an increase in the provision of agricultural public
infrastructure. However, the Gini coefficient G may be worsened by the rise in unemployment.
To investigate the impact on welfare, we expand equation (17) as

W( LS )2
wA
2
[2
L
L

(
L
)

L
(
L

L
)
]

wS
S U
U
UN
U
UA
( L )2( L )2(17’)

where L  LS  LU . We summarize the welfare effects of the increased provision of the neutral
agricultural public infrastructure in Proposition 2.
Proposition 2: An increase in the provision of the neutral agricultural public infrastructure
would improve welfare if

(1 

1
 1kY w
kY w
wA ) pA g FLA 
pA gFLLA ,
LU  LUA
k X ( LU  LUA )k X ( LU  LUA )and worsen welfare otherwise.
Here  1 [2 LU ( LS  LUX )  2 LUX LUA  ( LUA )2 ]LUX w
0.
2( wA )2 LUN LUA

Proof: See Appendix A-4.

■

By equation (17’), we know that the impact on welfare depends on the changes in the
agricultural wage rate, the agricultural employment and urban unemployment. Lemma 1

11 / 27

implies that the agricultural wage rate rises, and urban unemployment falls as long as the
agricultural employment rises. Therefore, welfare may deteriorate only when urban
unemployment rises. As shown in Proposition 1, urban unemployment rises if the “urban
expected wage effect” dominates the neutral “agricultural productivity effect” and the “rurallabor employment effect”. Here we identify similar effects with adjustments on the conditionin Proposition 2. Welfare improves if the neutral “agricultural productivity effect” and the “rurallabor employment effect” (LHS) are larger than the “urban expected wage effect” (RHS), anddeteriorates otherwise.
At the end of this subsection, two points are worth stressing. First, increasing the provisionof agricultural public infrastructure may not necessarily improve welfare if we take both
efficiency (per-capita income) and fairness (the Gini coefficient) into account. As discussed
before, per-capita income always rises with an increase in the provision of agricultural public
infrastructure, but the Gini coefficient may be worsened with the rise of urban unemployment.
Second, the reduced skilled-unskilled wage inequality does not imply the increase in welfare
because the income dispersion between unskilled and skilled labor, as reflected by the Gini
coefficient, may be worsened.
3.2 Land-augmenting agricultural public infrastructure
When the agricultural public infrastructure is land-augmenting, the model also consists of
sixteen equations, namely, equations (1)-(8), equations (9b)-(11b) and equations (12)-(16). The
mechanism of this case is almost the same as that in the previous case. To save the space, weomit the detailed calculation which is available upon request. The results are qualitatively thesame as those in subsection 3.1. We only need to replace pA gFLLA with p A FLLA , and p A g FLTA
A
with p A g TFLT
in the conditions of Lemma 1, Corollary 1, Proposition 1 and Proposition 2.

In other words, the neutral agricultural productivity effect is replaced by the land-augmenting
agricultural productivity effect.
We use Proposition 3 to summarize the findings in this case.
Proposition 3: An increase in the land-augmenting agricultural public infrastructure provision
will exert almost the same effects as those in Lemma 1, Corollary 1, Propositions 1 and 2, withslight modification of the conditions. The results depend on the interactions among the landaugmenting “agricultural productivity effect,” the “rural labor employment effect” and the“urban expected wage effect.”
Proof: See the above discussion.

■

3.3 Labor-augmenting agricultural public infrastructure

12 / 27

When the agricultural public infrastructure is labor-augmenting, the model is constituted
by equations (1)-(8), equations (9c)-(11c) and equations (12)-(16). Lemma 2 provides the basis
for our analysis.
Lemma 2: When the government raises the provision of labor-augmenting agricultural public
infrastructure,(i) The labor employment of the urban low-skill sector increases;(ii) The wage rate of the agricultural sector increases ifkpA g FLA wA (1   LUA )  Y pA wgFLAL  0 ，kX
and decreases otherwise;(iii) The labor employment of the agricultural sector increases if

pA g FLA (1   LUA ) 

wkY,( LU  LUA )k X

and decreases otherwise.
Here  LUA wA gLUA
 0 represents the agricultural wage elasticity of the efficient unit
gLUA wA

labor employment.
Proof: See Appendix A-5.

■

When the agricultural public infrastructure is labor-augmenting, the “agricultural
productivity effect” is described by pA g FLA (1   LUA ) , while the “urban expected wage effect”
and the “rural labor employment effect” are described by

wkY
kand Y p A gFLAL askX( LU  LUA )k X

before. Different from subsections 3.1 and 3.2, the labor-augmenting “agricultural productivity
effect” is not always positive. The rise in the public infrastructure provision not only generates
a positive impact on the agricultural wage rate by increasing agricultural productivity, but also
has a negative effect on the agricultural wage rate due to the increase in the efficient unit labor
employment ( g ( R ) LUA ). Whether the labor-augmenting “agricultural productivity effect”
raises the agricultural wage depends on the agricultural wage elasticity of the efficient unit labor
employment  LUA . If the agricultural wage is inelastic of the efficient unit labor employment,
i.e. 1   LUA  0 , the labor-augmenting “agricultural productivity effect” leads to an increasein the agricultural wage rate, and the analysis is similar to Lemma 1. If the agricultural wage iselastic of the efficient unit labor employment, i.e.  LUA  1 , however, the labor-augmenting

13 / 27

“agricultural productivity effect” is negative. This effect may be compensated by the “rurallabor employment effect” that stimulates the rise of the agricultural wage rate. If the (negative)
labor-augmenting agricultural productivity effect is dominated by the “rural labor employment
effect,” i.e. pA g FL wA (1   LUA ) AkYpA wgFLAL  0 , the agricultural wage increases. The
kX

same logic applies in the opposite case.
The intuition of Lemma 2-(i) and Lemma 2-(iii) is similar to that of Lemma 1-(i) andLemma 1-(iii).
The impact on the skilled-unskilled wage gap is straightforward from Lemma 2. We state
it in Corollary 2.
Corollary 2: An increase in the provision of labor-augmenting agricultural public infrastructure
provision would narrow down the wage gap if

k (L  L )pA g FLA (1   LUA )  Y U UA pA gFLLA ,k X LUX
and widen the wage gap otherwise.
Proof: See Appendix A-6.

■

Similar to the analysis in Corollary 1, we can see that the increased provision of laboraugmenting agricultural public infrastructure has no impact on the skilled wage rate. Then,based on the analysis of Lemma 2, we can immediately obtain Corollary 2.
Now we analyze the impact on urban unemployment. Proposition 4 establishes the results.
Proposition 4: When the government raises the provision of labor-augmenting agricultural
public infrastructure, urban unemployment falls if

kY wLUNkpA g FLA (1   LUA )  Y pA gFLLA ,kXk X ( LU  LUA )2
and rises otherwise.
Proof: See Appendix A-7.

■

The impact on urban unemployment also depends on the three effects identified before.
However, as discussed below Lemma 2, the labor-augmenting “agricultural productivity effect”
can be positive or negative, depending on the agricultural wage elasticity of the efficient unit
labor employment  LUA . When 1   LUA  0 , the labor-augmenting “agricultural
productivity effect” is positive, then the intuition is the same as in Proposition 1. When

14 / 27

 L  1 , the labor-augmenting “agricultural productivity effect” is negative, and the “ruralUAlabor employment effect” ( p A gFLLA

kY) is the only incentive for unskilled labor to work in thekXrural area. If the sum of these two opposing forces in the agricultural sector dominates the“urban expected wage effect,” i.e., pA g FL (1   LUA ) A

kY wLUNkY
pA gFLLA , urbankXk X ( LU  LUA )2

unemployment falls.
The welfare effect is as follows.
Proposition 5: With an increase in the provision of labor-augmenting agricultural public
infrastructure, welfare improves if

pA g FLA (1   3 wA )(1   LUA )  3kY wpA gFLLAk X ( LU  LUA )



kY w
,
k X ( LU  LUA )and deteriorates otherwise.

[2 LU ( LS  LUX )  2 LUX LUA  ( LUA )2 ]LUX w
Here  3 > 0.
2( wA )2 LUN LUA
Proof: See Appendix A-8.

■

The intuition of Proposition 5 is similar to that of Proposition 2, except for that the laboraugmenting “agricultural productivity effect” ( pA g FL (1   3 wA )(1   LUA ) ) can be positiveAor negative, as discussed in Lemma 2 and Proposition 4.
Summing up the impacts of the three types of agricultural infrastructure, we find that thechanges in urban unemployment and welfare are determined by three effects, i.e. the“agricultural productivity effect,” the “rural labor employment effect,” and the “urban expected
wage effect.” We summarize the specific results in table 1.
From the above analysis, we can conclude that increasing the provision of the three typesof agricultural infrastructure does not necessarily reduce urban unemployment or improvewelfare. Furthermore, Propositions 1, 3 and 4 imply that the growing provision of the three
types of agricultural public infrastructure may indirectly exert the “urban job creation puzzle”
raised by Harris and Todaro (1970). That is, the number of rural-urban migrants exceeds that of
the job vacancies created in urban areas, leading to a rise in urban unemployment. In addition,
when the agricultural public infrastructure is neutral or land-augmenting, raising its provision
would reduce the skilled-unskilled wage inequality; whereas increasing the provision of laboraugmenting agricultural public infrastructure may widen or narrow down the wage gap.

15 / 27

Table 1 Impacts of Increasing Agricultural Infrastructure Provision
Type

Urban Unemploymentrise (fall) if

Neutralincrease (decrease) ifkp A g FLA  Y p A gFLLAkX
 ( )

kY wLUNk X ( LU  LUA ) 2

Land-augmentingkY
p A gFLLA
kX

(1 

1
wA ) p A g TFLTA
LU  LUA

 1kY wpA FLLAkY w
 ( )k X ( LU  LUA )k X ( LU  LUA )rise (fall) if

increase (decrease) ifkp A g FLA (1   LUA )  Y p A gFLLAkX
 ( )

1
wA ) p A g FLA
LU  LUA

increase (decrease) if

kY wLUN ( )k X ( LU  LUA )2

Labor-augmenting(1 

 k wp gF A
kY w
 1 Y A LL  ()k X ( LU  LUA )k X ( LU  LUA )rise (fall) if

p A g TFLTA 

WelfarekY wLUNk X ( LU  LUA ) 2

p A g FLA (1   3 wA )(1   LUA ) k wp gF A
kY w
 () 3 Y A LL .
k X ( LU  LUA )k X ( LU  LUA )4. Extension and discussion
In this section, we extend the model in Section 3 by considering the following three cases.
In the first case, unskilled labor is employed to produce agricultural public infrastructure.
Second, we consider an alternative way of providing agricultural public infrastructure. Third,
we discuss an alternative taxation to finance the provision of agricultural public infrastructure.
4.1 Agricultural public infrastructure by the employment of unskilled labor
Unskilled labor is employed in the production of some types of agricultural public
infrastructure, such as new roads, drainage facilities and irrigation systems. We modify the basicmodel to characterize this scenario.
The production function of the public sector is changed toR  F P ( LUR ) .

(18)

where LUR is the unskilled labor employed by the public sector. Here the unskilled labor in this
sector is also protected by the urban minimum wage act (Djankov and Ramalho, 2009).
The budget balance for the public infrastructure provision is
16 / 27

wLUR  tK .

(19)

The market clearing conditions for the skilled and unskilled labor are rewritten as
LSY  LS ,(20)

LUN  LUX  LUR  LUA  LU .

(21)

For rural migrants, there are job opportunities both in the urban low-skill sector and in the
public sector. Accordingly, the rural-urban migration equilibrium condition iswA 

LUX  LURw.
LUX  LUR  LUN(22)

For the neutral agricultural public infrastructure provision, the extended model is composedof sixteen equations, namely, equations (1)-(6), equations (9a)-(11a), equations (14)-(15), andequations (18)-(22). Then, we can solve sixteen endogenous variables, which are X , Y , A ,LSY , LUX , LUR , LUA , LUN , K X , KY , T , wS , wA , t , r and  . The policy variable isalso R , and others are parameters. Similar to the analysis in Section 3, we can obtain theequation systems in the cases when the agricultural public infrastructure is land-augmenting orlabor-augmenting. We summarize our findings in Proposition 6.6
Proposition 6: When the agricultural public infrastructure is produced by the employment of
unskilled labor, for each type of agricultural public infrastructure, the results in Section 3 holdqualitatively.
4.2 Procuring agricultural public infrastructure from private sectors
In Section 3, we assume that the agricultural public infrastructure is provided by the public
sector and financed by via per-capital tax. Now we consider an alternative way to provide theagricultural public infrastructure.
We treat the products of urban low-skill and high-skill sectors as composite goods, which
can be either privately consumed or used as the agricultural public infrastructure. In this case,without setting the public sector, the government procures from the urban low-skill and highskill sectors to supply the agricultural public infrastructure. Such a way to provide public
infrastructure is widely used in the literature on public economics, such as Zodrow andMieszkowski (1986), Hoyt (2001) and Keen and Kotsogiannis (2002). In this case, equation (7)in the basic model is deleted and equation (12) becomes LSY  LS .
We find that the results in this case are consistent with the results in Section 3 where theemployment of skilled labor in the public sector is very small compared to the endowment of
6

To save the space, we omit the computation which is available upon request.

17 / 27

skilled labor, i.e.,LSR 0 . In other words, this is a special case of Section 3 where the “urban
LS

expected wage effect” is eliminated.
4.3 Non-distortionary tax

Instead of per-capita tax, the agricultural public infrastructure may be financed by nondistortionary tax on consumers. In this case, the government’s objective is to choose anappropriate

R to maximize national income, which is a common goal shared by thegovernments in developing countries.
As argued by Anwar (2006), the initial provision of agricultural public infrastructure needs
not be optimal and hence, no attempt should be made to consider the optimal agricultural public
infrastructure provision. The government just behaves as a Stackelberg leader who chooses R
first, and then given R , the sectors in the supply side organize their production behavior. Here
we only consider how the marginal increase in R influences the supply side of the whole
economy and social welfare, and the results in the basic model still hold.
5. Concluding remarks
Existing literature shows that the provision of agricultural public infrastructure is of great
importance for agricultural production and economic development. However, the impact ofincreased agricultural public infrastructure provision on urban unemployment and social
welfare lacks a complete theoretical analysis. The present paper aims at filling this research gap
by establishing a theoretical framework to investigate this issue.
Our results have several policy implications. First, it is almost equivalent for thegovernment to provide neutral and land-augmenting agricultural public infrastructure. If
governments can efficiently provide these two types of public infrastructures to encourage rural
people to work in rural areas, such a policy can reduce urban unemployment and improve social
welfare. However, if the increased provision stimulates too much rural-urban migration of
unskilled labor, the negative impacts on urban unemployment and welfare dominate. In thiscase, other actions should be taken to reduce urban unemployment and prevent the deteriorationof welfare. Nevertheless, in both cases, the skilled-unskilled wage inequality is reduced. Second,
if the government provides the labor-augmenting public infrastructure, the impact on skilledunskilled wage inequality is ambiguous with more complex economic mechanism. In particular,
the wage gap may be widened when the agricultural wage is elastic of the efficient unit labor
employment.
All in all, the present paper is just an attempt to theoretically explore the impacts on urban

18 / 27

unemployment, wage inequality and social welfare of one important rural development policy,
the agricultural public infrastructure provision. It may provide a theoretical benchmark for
empirical studies on the impacts of agricultural public infrastructure. The consideration ofenvironmental protection may also be a direction for future research.

19 / 27

Appendices:(A-1) Proof of Lemma 1
Equation (7) impliesdLSR
 1 . Then, by equations (4), (6), (13) and (14), we have:dR

FKX ( LUX , K X )  pY FKY ( L  LSR , K  K X ) .

Total differentiation of the above equation and equation (3) yields:
X
 FKL
 X
 FLL

Y
X
Y
  dLUX    pY FKLpY FKK FKK dR .


X
dK
FLK
0
X 




Then, homogeneity of degree zero of FLX and FLY implies:

dLUX kY 0.
dR k X
where k X KX
KYand kY .
LUX
LSY

Total differentiation of equations (10a), (11a), (15) and (16) yields:

 p g F A 
 1
 p A gFLLA   dwA   A L    wkY  dR .
dL
L

L

w
A
 U UA  UA   kXThe determinant of the coefficient matrix of the above equations system is denoted as 1 ,where

1  wA  pA gFLLA ( LU  LUA )  0 . Then:dwA 1
k pA ( g FLA wA  wgFLLA Y )  0 ,dR 1
kX
dLUA 1k [ pA g FLA ( LU  LUA )  w Y ] .
dR 1
kX
If

wkY
 () pA g FLA , then dLUA  ()0 .
( LU  LUA )k X
dR■(A-2) Proof of Corollary 1
By equation (5),dwS
Y dLSY
Y dKY.
 pY FLL pY FLKdR
dR
dR
By equations (7) and (12),dLSYdL  SR  1 . In addition, according to equation (14),dR
dR

20 / 27

dLUX kYdK X
F X dLUX
dKY
dK X
  LLX. By equation (3),, anddR k XdR
FLK dRdR
dR
Appendix (A-1). Hence

degree zero,according to

dKY
FX k
 LLX Y  0 . Because FLX and FLY are homogeneous ofdR
FLK k XdwS
F Y FLLX kY
k kYY pY FLL（-1+ LK）= pY FLL（-1+ X Y ）=0 .
Y
XdR
FLL FLK k X
kY k X

Finally, as shown by Lemma 1,

dwA
 0 . Therefore, dwS  dwA  0 .
dR
dR
dR

■

(A-3) Proof of Proposition 1
By equation (13), we have:

dLUN
dL
dL
 ( UX  UA ) .
dR
dRdR
By Appendix (A-1), we have:

dLUN
k
1

{ pA g FLA ( LU  LUA )  [ w  wA  pA gFLLA ( LU  LUA )] Y } .
dR 1kX
If pA g FL kYk ( w  wA )dLUN
pA gFLLA  Y, then,0;kX
k X ( LU  LUA )dR

If pA g FL kYk ( w  wA )dLUN
pA gFLLA  Y, then,0.
kX
k X ( LU  LUA )
dR

A

A

■

(A-4) Proof of Proposition 2
Equation (17) can be rewritten as,

W( LS )2
wA
2
[2
L
L

(
L
)

L
(
L

L
)
]

wS .
S U
U
UN
U
UA
( L )2( L )2where L  LS  LU . By totally differentiating the above equation and substituting equations(13) and (16), we have:( L )2
Substitutingdw
dW 2( wA )2 LUN LUA dLUA [2 LU ( LS  LUX )  2 LUX LUA  ( LUA )2 ] A .
dR
LUX w
dR
dR
dLUA
dwA
and
into the above expression yields:dR
dR

21 / 27

( L )2kdW
1 2( wA ) 2 LUN LUA[ p A g FLA ( LU  LUA )  w Y ]
dR 1
LUX w
kX

k
1
 [2 LU ( LS  LUX )  2 LUX LUA  ( LUA ) 2 ]( p A g FLA wA  p A wgFLAL Y )1kX
Let  1 .

[2 LU ( LS  LUX )  2 LUX LUA  ( LUA )2 ]LUX w. Then,2( wA )2 LUN LUA

If (1 1
 1kY w
kY w
dUwA ) pA g FLA 
pA gFLLA , then0;
LU  LUA
k X ( LU  LUA )k X ( LU  LUA )dR

If (1 1
 1kY w
kY w
dUwA ) pA g FLA 
pA gFLLA , then0. ■LU  LUA
k X ( LU  LUA )k X ( LU  LUA )dR(A-5) Proof of Lemma 2
Similar to Appendix (A-1), we can get

dLUX kY 0 . Total differentiation of equations
dR k X(10c), (11c), (15) and (16) yields:

 1 LU  LUA

 gwA (1   LUA )  p A gF   dwA   g
 dR .

wkY

 wA   dLUA  


kX


A
LL

The determinant of the coefficient matrix of the above equations system is denoted as  2 ,where 2  wA  pA gFLLA ( LU  LUA )  0 and  LUA wA gLUA
 0 . Then:gLUA wAdwA 1k
 [ pA g FLA wA (1   LUA )  pA wgFLAL Y ] ,dR  2kX
dLUA 1k [ pA g FLA (1   LUA )( LU  LUA )  w Y ] .
dR  2kX
The impact on wA is ambiguous. If pA g FLA wA (1   LUA )  pA wgFLAL

kY ()0 , thenkXdwA
 ()0 .
dR
The impact on LUA is also ambiguous. If pA g FL (1   LUA )  ()A

dLUA
 ()0 .
dR■

22 / 27

wkY, then( LU  LUA )k X

(A-6) Proof of Corollary 2
Similar to Appendix (A-2),

dwS
 0 . The impact on wA has been derived in AppendixdR(A-5). Thus, the impact on skilled-unskilled wage inequality is straightforward.
In the situation where 1   LUA  0 ,dwS dwA

 0.
dR
dR

k ( LU  LUA )pA gFLAL , thenk X LUXIn the situation where  LUA  1 , if pA g FL (1   LUA )  () Y
A

dwS dwA ()0 .
dRdR■(A-7) Proof of Proposition 4
Equation (13) implies:

dLUN
dL
dL
 ( UX  UA ) .
dRdRdR
From Appendix (A-5), we have:

dLUN
k
1

{ pA g FLA (1   LUA )( LU  LUA )  [w  wA  p A gFLLA ( LU  LUA )] Y } .
dR  2kX
In the situation where 1   LUA  0 ,dLUN
 ()0 if:
dR

kY wLUNkpA g FLA (1   LUA )  Y pA gFLAL  ();kXk X ( LU  LUA )2
In the situation where  LUA  1 ,dLUN
 ()0 if:dR pA g FLA (1   LUA ) 

kY wLUNk ()  pA gFLLA Y .
2
k X ( LU  LUA )kX(A-8) Proof of Proposition 5
Total differentiation of equation (21’) yields:( L )2dw
dW 2( wA )2 LUN LUA dLUA [2 LU ( LS  LUX )  2 LUX LUA  ( LUA )2 ] A .
dR
LUX w
dR
dR

Substituting

dLUA
dwA
and
derived in Appendix (A-5), we have:dR
dR

23 / 27■

( L )2kdW
1 2( wA ) 2 LUN LUA[ p A g FLA (1   LUA )( LU  LUA )  w Y ]
dR 1
LUX w
kX

k
1
 [2 LU ( LS  LUX )  2 LUX LUA  ( LUA ) 2 ][ p A g FLA wA (1   LUA )  pA wgFLLA Y ]1kX
Denote  3 .

[2 LU ( LS  LUX )  2 LUX LUA  ( LUA )2 ]LUX w. Then,2( wA )2 LUN LUA

In the situation where 1   LUA  0 ,pA g FLA (1   3 wA )(1   LUA ) 
In the situation where  LUA  1 ,dU
 ()0 if :dR k wp gF A
kY w
 () 3 Y A LL ,k X ( LU  LUA )k X ( LU  LUA )dU
 ()0 if :dR

 3kY wpA gFLLA
kY w
 pA g F (1   3 wA )(1   LUA )  () .
k X ( LU  LUA )k X ( LU  LUA )A
L24 / 27■

References:
Anwar, S. “Government Spending on Public Infrastructure, Prices, Production and International
Trade,” The Quarterly Review of Economics and Finance 41 (2001): 19-31.
Anwar, S. “Provision Of Public Infrastructure, Foreign Investment and Welfare in the Presenceof Specialisation-Based External Economies.” Economic Modelling 23 (2006): 142-156.
Anwar, S. “Labor Supply, Foreign Investment and Welfare in the Presence of Public
Infrastructure,” Economic Modelling 25 (2009a): 959-967.
Anwar, S. “Labor Inflow Induced Wage Inequality and Public Infrastructure,” Review ofDevelopment Economics 14 (2009b): 792-802.
Beladi, H., and C-C Chao. “Environmental Policy, Comparative Advantage, and Welfare for aDeveloping Country,” Environment and Development Economics 11 (2006): 559-568.
Beladi, H., and S. Marjit. “Foreign Capital and Protectionism,” Canadian Journal of Economics
25 (1992): 233-238.
Beladi, H., and N. Naqvi. “Urban Unemployment and Non-Immiserizing Growth,” Journal of
Development Economics 28 (1988): 365-376.
Beladi, H., A. Chakrabarti, and S. Marjit. “Skilled-Unskilled Wage Rate Inequality and Urban
Unemployment,” Economic Inquiry 48 (2010): 997-1007.
Beladi, H., S. Chaudhuri, and S. Yabuuchi. “Can International Factor Mobility Reduce Wage
Rate Inequality in a Dual Economy?” Review of International Economics 16(5) (2009):
893-903.
Chao, C-C, and E. Yu. “Capital Markets, Urban Unemployment and Land,” Journal of
Development Economics 38 (1992): 407-413.
Chaudhuri, S. “Wage Inequality in a Dual Economy and International Mobility of Factors: Do
Factor Intensities Always Matter?” Economic Modelling 25 (2008): 1155-1164.
Chaudhuri, S., and S. Yabuuchi. “Economic liberalization and wage inequality in the presenceof Labor market imperfection,” International Review of Economics and Finance 16 (2007):592-603
Chaudhuri, S. “Rural-Urban Migration, Informal Sector, Urban Unemployment, andDevelopment Policies: A Theoretical Analysis,” Review of Development Economics 4(2000): 353-364.
Chaudhuri, S. “Labour Market Reform, Welfare and Urban Unemployment in a Small Open
Economy,” Keio Economic Studies 43 (2006): 1-17.
Chaudhuri, S. “Foreign Capital, Welfare and Urban Unemployment in the Presence ofAgricultural Dualism,” Japan and the World Economy 19 (2007): 149-165.
Djankov, S., and R. Ramalho. “Employment Laws in Developing Countries,” Journal ofComparative Economics 37 (2009): 3-13.

25 / 27

Fan, S., and X. Zhang. “Infrastructure and Regional Economic Development in Rural China,”
China Economic Review 15 (2004): 203-214.
Grinols, E.L. “Unemployment and Foreign Capital: The Relative Opportunity Costs ofDomestic Labor and Welfare,” Economica 58 (1991): 59-78.
Gupta, M.R. “Rural-Urban Migration, Informal Sector And Development Policies: A
Theoretical Analysis,” Journal of Development Economics 41 (1993): 137-151.
Gupta, M.R. “Foreign Capital, Income Inequality and Welfare in a Harris-Todaro Model,”Journal of Development Economics 45 (1995): 407-414.
Gupta, M.R. “Foreign Capital and the Informal Sector: Comments on Chandra and Khan,”Economica 64 (1997): 353-363
Gupta, M.R. “Duty-Free Zone, Unemployment, and Welfare: A Note,” Journal of
Economics 59 (1994), 217-236.
Harris, R., and M. Todaro. “Migration, Unemployment, and Development: A Two Sector
Analysis,” American Economic Review 60 (1970):126-142
Hoyt, W.H. “Tax Policy Coordination, Vertical Fiscal Externalities, and Optimal Taxation in a
System of Hierarchical Governments.” Journal of Urban Economics 50(3), 491-516.
Keen, M., and C. Kotsogiannis. “Does Federalism Lead to Excessively High Taxes?” American
Economic Review 92 (2002): 363-370.
Krichel, T., and P. Levine. “The Welfare Economics of Rural-To-Urban Migration: The HarrisTodaro Model Revisited,” Journal of Regional Science 39 (1999): 429-447.
Marjit, S., and H. Beladi. “Protection and Gainful Effects of Foreign Capital,” Economics
Letters 53 (1996): 311-316.
Marjit, S., S. Kar, and B.R. Hazari. “Emigration, Unemployment and Welfare: The Role of
Non-Traded Sector,” North American Journal of Economics and Finance 24 (2013):298–
305.
Pan, L. “The Impacts of Education Investment on Skilled–Unskilled Wage Inequality andEconomic Development in Developing Countries,” Economic Modelling 39 (2014): 174181.
Pi, J., and Y. Zhou. “Public infrastructure provision and skilled-unskilled wage inequality indeveloping countries,” Labour Economics 19 (2012):881-887.
Pi, J., and Y. Zhou. “Foreign Capital, Public Infrastructure, and Wage Inequality in Developing
Countries,” International Review of Economics and Finance 29 (2014): 195-207.
Pi, J., and Y. Zhou. “Rural Property Rights, Migration, and Welfare in Developing Countries,”
The B.E. Journal of Economic Analysis & Policy (Advances) 15 (2015a), 997-1030.
Pi, J., and Y. Zhou. “International Factor Mobility, Production Cost Components, and Wage
Inequality,” The B.E. Journal of Economic Analysis & Policy (Contributions): 15 (2015b),

26 / 27

503-522.
Pinstrup-Andersen P., and S. Shimokawa. Rural infrastructure and agricultural development,
World Bank.
Sen, A. “Real national income,” The Review of Economic Studies 43 (1976): 19-39.
Teruel, R.G., and Y. Kuroda. “Public Infrastructure and Productivity Growth in Philippine
Agriculture, 1974–2000,” Journal of Asian Economics 16 (2005):555-576.
Todaro, M. “Urbanization, Unemployment and Migration in Africa: Theory and Policy,” Policy
Research Division Working Paper No. 104 (New York: Population Council, 1997).
Yabuuchi, S., and S. Chaudhuri. “International Migration of Labor and Skilled-Unskilled Wage
Inequality in a Developing Economy,” Economic Modelling 24 (2007): 128-137.
Zenou, Y. “Rural-Urban Migration and Unemployment: Theory and Policy Implications,”
Journal of Regional Science 51 (2011): 65-82.
Zhang, X., and S. Fan. “How Productive is Infrastructure? A New Approach and Evidence from
Rural India,” American Journal of Agricultural Economics 86 (2004): 492-501.
Zodrow G., and P. Mieszkowski. “Pigou, Tiebout, Property Taxation, and the Underprovisionof Local Public Goods,” Journal of Urban Economics 19 (1986): 356-370.

27 / 27