Subsidy of Land Rent and Wage Inequality in a Dual Agricultural Economy

Through the establishment of general equilibrium models with different development stages of modern agriculture, this paper examines the impact of subsidy on land rent in modern agriculture on the wage inequality between skilled labor and unskilled labor in a dual agricultural economy. Moreover, we also take the financing constraint into consideration, and the source of subsidy comes from taxes. The main conclusions are: at the preliminary stage of modern agriculture, enforcement of subsidy on land in the modern agriculture narrows down wage inequality. While at the development stage, implement of this policy obtains an opposite result and expands wage inequality instead.