International factor mobility, environmental pollution and skilled-unskilled wage inequality in developing countries

This paper establishes a static three-sector general equilibrium model by accommodating environmental pollution to investigate the impact exerted by skilled immigrants and foreign direct investment on the skilled-unskilled wage inequality. Environment is treated as an input for agricultural production. The production process of the urban low-skill sector generates environmental pollution, which deteriorates the rural environment and thereby influences agricultural production. The present paper highlights the role of environmental pollution in the determination of the skilled-unskilled wage inequality due to skilled immigrants and foreign direct investment.