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Service Links and Wage Inequality

Author

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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.

Suggested Citation

  • Kong Weng Ho & Hian Teck Hoon, 2003. "Service Links and Wage Inequality," Departmental Working Papers wp0301, National University of Singapore, Department of Economics.
  • Handle: RePEc:nus:nusewp:wp0301
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    File URL: http://www.fas.nus.edu.sg/ecs/pub/wp/wp0301.pdf
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    References listed on IDEAS

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    1. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 135-159.
    2. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
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    More about this item

    Keywords

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

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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