Skilled-unskilled wage inequality, product variety, public input and increasing returns: A static general equilibrium analysis

► An increase in capital stock raises the skilled-unskilled wage ratio. ► An increase in unskilled labour endowment raises lowers the skilled-unskilled wage ratio. ► An increase in the tax rate on industrial output lowers the skilled-unskilled wage ratio. ► An increase in the price of the agricultural product lowers the skilled-unskilled wage ratio.