Openness, Technological Change and Labour Demand in Pre-Crisis Indonesia

This paper examines the impact of export orientation, import competition, foreign ownership and the rate of capital accumulation on the relative demand for skilled and unskilled labour in pre-crisis Indonesia. Estimates from an interrelated factor demand analysis indicate that openness and foreign ownership, by themselves, acted to raise the relative demand for unskilled workers in the pre-crisis period, while the newness of capital was associated with increased relative demand for skilled workers. Overall, the relative demand for unskilled workers increased yet their relative wage position weakened. These contrasting relative employment and wage changes are consistent with the examined demand shocks and the greater elasticity of supply of Indonesian unskilled relative to skilled labour.     

The Lost Race between Schooling and Technology

We study the evolution of wage inequality between skilled and unskilled workers in the Netherlands for the years 1969-2020. Our analysis is based on estimates of the production structure in the Netherlands, projections of the relative supply of skilled workers, and projections regarding shifts in relative demand for skilled workers. Wage inequality will increase under plausible assumptions because relative demand for skilled workers will increase more rapidly than the relative supply of skilled workers. We study the potential of education subsidies to higher education in order to stimulate the supply of skilled workers thereby off-setting the increase in projected wage inequality. Our findings suggest that education subsidies are not very effective in combatting increases in wage inequality.     

Trade,technology, and the labour market: impacts on wage inequality within countries

This paper focuses on the widening wage inequality between skilled and unskilled workers within countries and discusses whether trade and technology have contributed to this trend. The paper develops an analytical framework for wage inequality that traces the determinants and their relative roles in wage inequality in different stages of the development of trade theory, especially those considering new evidence after 2011. We find that technology plays a key role in the rise of wage inequality in most countries, while trade plays an increasingly crucial and more complex role in recent years. Skill supply institutions, such as education systems supplying skilled labour or unions participating in wage‐setting processes, suppress the rise of wage inequality in some countries. The paper further outlines the mechanisms through which trade affects wage inequality, including offshoring, firm heterogeneity, labour market frictions and global value chains. We find that trade has indirect effects on technology, which further enlarges the wage inequality among skills. The paper also discusses the policy implications of the impacts of trade and technology on wage inequality.     

Multinational companies and wage inequality in the host country: The case of Ireland

Multinational Companies and Wage Inequality in the Host Country: The Case of Ireland. — In this paper, the authors analyze the impact of multinational companies on wage inequality in a host country. Based on a model, in which the introduction of new technologies leads to increases in the demand for skilled labour and, therefore, to rising wage inequality, they econometrically study the Irish manufacturing sector between 1979 and 1995. They examine inequality between wages for skilled and unskilled labour within the same manufacturing sector. Their results indicate that there is an inverted-U relationship between wage inequality and multinationals, i.e., with the increasing presence of multinationals, wage inequality first increases, reaches a maximum, and decreases eventually.     

Institutions, wages, and inequality: The case of Europe and its periphery (1500–1899)

This paper explores the long-run relationship between institutions and wage outcomes in Europe and its periphery. I find that cities that exercised stronger institutional protection of private property experienced: (i) higher levels of both skilled and unskilled real wages, as well as (ii) lower levels of inequality as measured by the skilled–unskilled wage ratio. While the first result corroborates existing work on the positive growth effects of better institutions, the second finding is more novel to the literature. Some explanations are proposed for how stronger institutions can cause an increase in the relative supply of skilled workers, thus lowering wage inequality.     

Global Outsourcing and Wage Inequality in Middle-Income Countries: Evidence from South Korea

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.     

The implications of South Africa's skills migration policy for country competitiveness

South Africa suffers from a shortage of skills, while at the same time having an excess of unskilled labour. The brain drain and the impact of HIV/Aids are threats to the current skills level in the labour force. Skilled workers generally create jobs for unskilled workers, and the level of skills in the labour force is an attraction for foreign investment. The new international migration policy imposes financial penalties and other restrictions on employers of foreigners with skills. The policy is detrimental to South Africa's competitiveness in the global economy and will deter investors and those needing to utilise skills not available in the South African labour market. A general immigration policy would be more appropriate to attract skilled foreigners to South Africa, where their skills can be absorbed into the labour force by supply and demand forces.     

Wage Differentials in Taiwanese Manufacturing, 1982–1997

The present paper examines the impacts of technological change and trade flows on wage inequality across manufacturing industries. Using micro–level data from the Taiwan Manpower Utilization Survey (TMUS), 1982–1997, a slight decline in the log–wage differential between college and high–school workers is detected during this period. These results indicate that the accelerated growth in the relative supply of college graduates, combined with steady demand growth in favor of more highly educated workers, can largely explain the narrowing wage differentials within Taiwanese manufacturing over the period 1982–1997. In terms of demand–side factors, this study concludes that technology and trade are the two major forces driving the differences in wage inequality across industries.     

Wage increases, wage convergence, and the Lewis turning point in China

We examine the wage trends of ordinary workers and the wage convergence between unskilled and skilled workers in China. First, we find that wages in all non-agricultural sectors, wages of migrant workers, and wages of hired workers in the agricultural sector have increased dramatically since 2003. Second, through comparing wage differentials between migrant and urban resident workers and between heterogeneous education groups within migrant workers, and by investigating the changes in the contribution of the returns to education to wage differentials, we find that the wages of unskilled and skilled workers have converged. Both the increasing wage trends and wage convergence are interpreted as evidence supporting the hypothesis that China has passed what can be called the Lewis turning point in the industrial sector. We conclude that the sustainability of economic growth in China requires an upgrading of labor market institutions to accommodate the merging of the rural and urban labor forces.     

Wage Divergence and Asymmetries in Unemployment in a Model with Biased Technical Change

In an attempt to explain the different wage and unemployment responses in mainland Europe and the US to a fall in demand for low-skilled labour, we present a model with two levels of skills and two classes of goods. We analyse the response to skill-biased technical change in two distinct labour market regimes. A trade-off between wage divergence and unemployment of skilled and unskilled workers occurs. Skill-biased technical change turns out to have a different impact in both regimes, due to a different working of the chimney effect.     

Economic geography and inequality in China: Did improved market access widen spatial wage differences?

New economic geography (NEG) models predict that costly transport and the spatial distribution of demand affect the profits firms can earn in different locations, leading to higher wages for workers employed in cities with better geographic access to markets. In light of the ongoing economic integration and market reforms that occurred in China after 1995, we use three waves of Chinese Household Income Project (CHIP) data to measure the extent to which the influence of market access on wages changed and affected wage dispersion across Chinese cities over the next 12 years. Employing the gravity-based method of Redding and Venables (2004) to calculate the market access available to firms located in each city, we test whether the elasticity of the wage with respect to local market access increased over time. We find that in all three years market access of the worker's location has a positive and significant influence on the wage. Consistent with extensive labor market reforms of the late 1990s, the estimated wage elasticity doubles between 1995 and 2002 and is stable thereafter. Our estimates indicate that wages of all workers become more responsive to market forces in a manner consistent with NEG predictions, both skilled and unskilled and those working for state as well as private enterprises. We also provide evidence that these results are not driven by omission of other forms of agglomeration or by selection bias. Estimated spatial differences in nominal wages are large: a worker moving from an inland location to the coast in 2007 would have doubled his or her nominal wage. Counterfactual analysis indicates that spatial differences in market access contribute to wage inequality, but less so over time.     

Global value chains,firms, and wage inequality: Evidence from China

How does participating or moving to more upstream in the global value chains (GVCs) affect the premium paid to skilled compared to unskilled labor within firms? In this paper, we develop a model of heterogeneous firms with intermediate trade and two skill inputs, in which we apply the fair wage hypothesis to predict the wage premium changes according to firms' GVCs activities. The model predicts that firms' backward GVC participation, as measured by the share of foreign value-added content in exports (FVAR), has an ambiguous impact on wage inequality of skills, which depends on the relative importance of “FVAR-labor substitution effect” and “FVAR-profit effect.” However, moving to upstream sectors in GVCs, as measured by the export varieties' upstreamness (or average distance from final use), raises a firm's wage premium. Using detailed Chinese firm-level data from 2000 to 2006, we develop a Mincer-type empirical model to study the wage premium changes associated with FVAR and upstreamness. We find robust empirical evidence that the rise of wage inequality in China mainly arises from moving to more upstream sectors rather than changing GVC participation.     

Scale-independent North-South trade effects on the technological-knowledge bias and on wage inequality

This paper develops a general equilibrium endogenous growth model that highlights the scale-independent mechanisms through which trade-induced North-South technological-knowledge diffusion affects the technological-knowledge bias and, thus, the paths of intra-country wage inequality. In contrast with the market-size effect, stressed in the previous literature on skill-biased technological change, the operation of the emphasized price channel following openness predicts, in line with the recent trends in developed and developing countries, an increasing skilled technological-knowledge bias, which, in turn, rises wage inequality in favor of skilled labor.     

全球生产网络、贸易结构与工资差距：来自中国的证据

论文通过建立全球生产网络的中间投入品模型,实证分析中间品贸易对一国技术劳动力和非技术劳动力工资差异的影响。研究发现：加工贸易是中国融入全球生产网络的典型形态;其出口会扩大对技术和非技术劳动力的需求。但技术劳动力的工资上涨幅度要高于非技术劳动力的工资涨幅,从而使相对工资差距扩大。短期内,中间品的进口减少了技术劳动力的需求和就业,但长期来看中间品进口会扩大对技术劳动力的需求,相对工资差距拉大。人力资本投资的供给增长由于未能满足劳动力市场的需求,从而在一定程度上表现为工资差距拉大;但长期来看,人力资本积累机制的完善使得相对工资差距会逐渐缓和。     

Skilled-Labor Intensity Differences Across Firms,Endogenous Product Quality,and Wage Inequality

This paper proposes a theory to explain the relative wage-rate increase for skilled labor that results from trade liberalization that relies on within-sector reallocations of production resources (skilled and unskilled labor) across firms. Motivated by some stylized facts, in a model with firm heterogeneity, including firms that differ in their skill intensity even within a narrowly defined industry, firms with relatively high skill intensity that are more likely to be exporters, and a positive association between a firm’s skill intensity and its product quality, I develop a general equilibrium model where firms with a higher skill intensity endogenously choose a higher-quality product, and tend to be more profitable. In this framework, a reduction in trade costs allows members of the workforce to reallocate to more efficient firms that produce higher-quality products, using their skilled labor more intensively, resulting in a rising skill premium. The main sources of the increasing wage inequality that followed trade openness are a positive link between a firm’s skill intensity, its product quality, and quality competition.     

Education and the labour market in Botswana

Using primary data from a 1993/4 Household Income and Expenditure Survey in Botswana, this article presents empirical results on occupational attainment, its determinants, and the extent of filtering down in Botswana's labour market, given changes in labour market conditions over time. It was found that the Botswana labour market has been characterised by some ‘filtering down’ of educated workers into less skilled jobs as the supply of skilled manpower exceeded demand. Those who entered the labour market earlier, those with more education, those located in the urban areas and male workers are more likely to occupy jobs that are higher up in the hierarchy than to be in an unskilled blue-collar job. Jobs higher up in the hierarchy are also more rewarding financially. The article shows that there is occupational segregation of workers by gender in Botswana's labour market in that female workers are generally confined to a narrow range of occupations. The policy implications are that employment creation has to be pursued vigorously and the issue of gender discrimination investigated further.     

Appropriation,firm dynamics,and wage inequality

This paper examines the income distribution and welfare effects of appropriation activities in an economy. In the short run, with a given number of firms, appropriation can narrow wage inequality between skilled and unskilled labor when the capital resources accrued by appropriators are not large. However, wage inequality widens when the capital accrued is large. In the long run, with free entry and exit of firms, an increase in appropriation can cause firms to enter when the accrued capital is not large. This gives rise to a win–win outcome by raising the wages of skilled and unskilled labor. However, if accrued capital is large, firms exit and a lose–lose situation may occur in which skilled and unskilled wages are reduced.     

FDI and the labour market: a review of the evidence and policy implications

This paper presents a series of results concerning the labour-marketimpact of inward foreign direct investment (FDI) in the UK.The paper demonstrates that one of the crucial impacts of FDIis to increase wage inequality and the use of relatively moreskilled labour in the domestic firms. This result is found tobe a combination of two effects. First, the entry by a multinationalenterprise (MNE) increases the demand for skilled workers inan industry or region, thus increasing wage inequality. Second,technology spillovers occur from foreign to domestic firms.As a result of these spillovers, relative demand for skilledworkers increases in the domestic firms, further contributingto aggregate wage inequality and skill upgrading. The paperalso considers how FDI impacts upon skill shares by productivitydifferentials between foreign and domestic firms. Finally, thepolicy implications of this are discussed, from the perspectiveof regional development, and the likely effectiveness of attractingFDI to reduce structural unemployment.     

外包与工资差距——基于工业行业数据的经验研究

本文首先检验了国际外包对我国熟练劳动力与非熟练劳动力工资差距的影响.计量结果表明,与斯托尔帕-萨缪尔逊定理所揭示的相反,外包贸易降低了我国相对丰裕的非熟练劳动力的相对工资.微电子设备的使用也加大了对熟练劳动力的需求,进一步加大熟练劳动力与非熟练劳动力的工资差距.为了检查是否是因为贸易形态的变化所导致的结果,我们进一步检...     

Tariffs,relative prices and wage inequality: Evidence from China

This paper, based on data from China after its membership into the World Trade Organization (WTO), shows the co-existence of a fluctuating skill premium and rises in wages for both skilled and unskilled labor. Our research provides one specific factor, the tariff reduction biased toward unskilled labor-intensive sectors, to explain and quantify the magnitudes of skill premium dynamics using the mandated-wage approach. The empirical evidence indicates that sector-biased tariff reductions have widened wage inequality in China through their effect on product prices. World price competition, on the other hand, has contributed to declining wage inequality via product prices, which is consistent with the endowment-based expectations of China's integration into the more skilled-labor abundant world.