TY - JOUR
T1 - Global Outsourcing and Wage Inequality in Middle-Income Countries
T2 - Evidence from South Korea
AU - Lee, Hongshik
AU - Sim, Soonhyung
N1 - Funding Information:
We would like to thank seminar participants at the Singapore Economic Review Conference (SERC) in Singapore in 2011. All responsibility for any errors remains our own. This work was supported by National Research Foundation of Korea Grant funded by the Korean Government (NRF-2011-332-B00064).
PY - 2016/1/2
Y1 - 2016/1/2
N2 - 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.
AB - 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.
KW - Global outsourcing
KW - middle income country
KW - system GMM
KW - wage inequality
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U2 - 10.1080/1226508X.2015.1081075
DO - 10.1080/1226508X.2015.1081075
M3 - Article
AN - SCOPUS:84957848984
VL - 45
SP - 19
EP - 41
JO - Global Economic Review
JF - Global Economic Review
SN - 1226-508X
IS - 1
ER -