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Service Links and Wage Inequality

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  • Kong Weng Ho

    ()
    (National University of Singapore)

  • Hian Teck Hoon

    (Singapore Management University)

Abstract

In our general equilibrium model, the variety of specialized service links affects international production fragmentation in manufacturing. Decreases in cost of education or fixed cost of service links raise the relative supply of skilled workers, increase service specialization, and decrease the price of aggregate services. Consequently, the market for service- and skill-intensive component manufacturing enlarges, raising relative demand for skilled workers. Empirically, endogenous change in international outsourcing rather than skill-biased technological progress is the main reason for a modest decline in wage gap despite the rapid rise in relative supply of skilled workers in Singapore from 1978 to 2000.

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Bibliographic Info

Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0301.

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Date of creation: Feb 2003
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Handle: RePEc:nus:nusewp:wp0301

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Keywords: Production Fragmentation; Service Links; Wage Inequality; Singapore; Technological Progress;

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  16. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents," NBER Working Papers 6384, National Bureau of Economic Research, Inc.
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