Offshoring and wage inequality : theory and evidence from China / Liugang Sheng (Chinese University of Hong Kong), Dennis Tao Yang (University of Virginia and IZA) ; IZA Institute of Labor Economics
VerfasserSheng, Liugang In der Gemeinsamen Normdatei der DNB nachschlagen ; Yang, Dennis Tao In der Gemeinsamen Normdatei der DNB nachschlagen
KörperschaftForschungsinstitut zur Zukunft der Arbeit In der Gemeinsamen Normdatei der DNB nachschlagen
ErschienenBonn, Germany : IZA Institute of Labor Economics, July 2017
Elektronische Ressource
Umfang1 Online-Ressource (63 Seiten) : Diagramme
SerieDiscussion paper ; no. 10924
URNurn:nbn:de:hbz:5:2-135887 Persistent Identifier (URN)
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Offshoring and wage inequality [0.68 mb]
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We present a global production sharing model that integrates the organizational choices of offshoring into the determination of relative wages in developing countries. The model shows that offshoring through foreign direct investment contributes more prominently than arms length outsourcing to the demand for skill in the South, thereby increasing the relative wage of skilled workers. We incorporate these theoretical results into an augmented Mincer earnings function and test the model based on a natural experiment in which China lifted its restrictions on foreign ownership for multinational companies upon its accession to the World Trade Organization in 2001. Empirical findings based on detailed Urban Household Surveys and trade data from Chinese customs provide support to our proposed theory, thus shedding light on the changes in firm ownership structure, the skill upgrading in exports, and the evolution of wage inequality from 1992 to 2008 in Chinas manufacturing sector.