Global Outsourcing and Wage Inequality in Middle-Income Countries

Evidence from South Korea

Hongshik Lee, Soonhyung Sim

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

A substantial number of studies have suggested that global outsourcing can induce wage inequality. As Feenstra and Hanson [(1996a) Foreign investment, outsourcing, and relative wage, in: R. C. Feestra, G. M. Hanson, and D. A. Irwin (Eds.) Political Economy of Trade Policy: Essays in Honor of Jagdish Bhagwati (Cambridge: The MIT Press), pp. 89–127] argued, global outsourcing is comparable to skill-biased technological change in that global outsourcing is more likely to increase the wage of skilled workers rather than their unskilled counterparts. We examine the effects of outsourcing on wage of skilled and unskilled workers in Korea's manufacturing sector with a focus on the dissimilar effects of outsourcing to developed countries (DCs) and less developed countries (LDCs) on relative wage. The results of system and difference GMM estimation based on manufacturing data from 1992 to 2006 indicate that outsourcing to DCs and LDCs have opposite (and significant) effects on relative wage, that is, outsourcing to DCs (LDCs) decreases the wage of skilled (unskilled) workers.

Original languageEnglish
Pages (from-to)19-41
Number of pages23
JournalGlobal Economic Review
Volume45
Issue number1
DOIs
Publication statusPublished - 2016 Jan 2

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outsourcing
South Korea
wage
income
skilled worker
evidence
unskilled worker
Wage inequality
Income
Outsourcing
manufacturing sector
trade policy
technological change
foreign investment
Korea
political economy
manufacturing
Relative wages
Wages
Less developed countries

Keywords

  • Global outsourcing
  • middle income country
  • system GMM
  • wage inequality

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Business and International Management
  • Political Science and International Relations

Cite this

Global Outsourcing and Wage Inequality in Middle-Income Countries : Evidence from South Korea. / Lee, Hongshik; Sim, Soonhyung.

In: Global Economic Review, Vol. 45, No. 1, 02.01.2016, p. 19-41.

Research output: Contribution to journalArticle

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