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

Wang, Wenxiao; Thangavelu, Shandre M.; Lin, Faqin

doi:10.1016/j.chieco.2021.101585

Cited by 17 publications

(11 citation statements)

References 65 publications

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“…The majority of previous studies focused on the effects of trade and international production sharing on skilled-unskilled wage inequalities or gender wage differences (see, i.a., Magda et al, 2020;Nikulin & Wolszczak-Derlacz, 2019;Wang et al, 2021). This study is believed to fill the research gap concerning limited cross-country evidence on a nexus of wage inequality-GVCs analysed from the perspective of components within and between firms.…”

Section: Discussionmentioning

confidence: 94%

GVC and wage dispersion. Firm-level evidence from employee?employer database

Nikulin

Wolszczak‐Derlacz

Parteka

2021

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Research background: Wage inequalities are still part of an interesting policy-oriented research area. Given the developments in international trade models (heterogeneity of firms) and increasing availability of micro-level data, more and more attention is paid to wage differences observed within and be-tween firms. Purpose of the article: The aim of the paper is to address the research gap concerning limited cross-country evidence on a nexus of wage inequality?global value chains (GVCs), analysed from the perspective of wage inequality components within and between firms. Methods: This paper uses a large employee?employer database derived from the European Structure of Earnings Survey (SES), combined with sector-level indicators of GVC involvement based on the World Input-Output Database (WIOD). As a result, a rich database covering more than 7.5 million observations is created. The regression-based decomposition modelling technique developed by Fiorio and Jenkins (2010) is used to identify the contributions of different factors to wage inequalities, focusing on the components within and between firms. Findings & value added: The analysis presented in this paper aimed to show the contribution of GVC involvement, among various other factors, to the observed inequality of wages. Due to the use of a rich database that merges employer and employee data, the effects materialised with respect to different types of wages could be analysed separately, in particular components between and within firms. The general conclusion from the regression-based decomposition in log wages is that GVCs contribute marginally to the observed wage inequality in the European sample analysed in this paper. Some differences confronting the components within and between firms (the latter dominates) are observed; there is also certain intra sample heterogeneity in the estimated results (e.g. due to sector type or country group), but the general result is robust.

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Section: Discussionmentioning

confidence: 94%

GVC and wage dispersion. Firm-level evidence from employee?employer database

Nikulin

Wolszczak‐Derlacz

Parteka

2021

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“…This heterogeneous behavior favors developed countries to a greater extent due to the modernization of their productive activities. Likewise, Wang et al [13] indicated that globalization improves human capital through technology and greater trade openness. This process encouraged developed countries to adapt to their advantages and increase their human capital to become more competitive in the global market.…”

Section: Hypotheses 1 (H1)mentioning

confidence: 99%

“…In the second group, Prettner and Strulik [27] and Wang et al [13] reported that globalization through the incorporation of technology had optimized learning processes that have increased human capital with new educational resources. Although, people who already had initial qualification conditions had more significant advantages concerning unskilled labor [18,28].…”

Section: Literature Reviewmentioning

confidence: 99%

Heterogeneity in the Causal Link between FDI, Globalization and Human Capital: New Empirical Evidence Using Threshold Regressions

et al. 2022

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Human capital formation in developing countries is a policy instrument to promote economic progress. In recent decades, FDI can act as a mechanism for transmitting human capital in the context of highly globalized countries. Extensive literature indicates that the formation of human capital is one of the most effective mechanisms for promoting structural change in countries. This research examines the causal link between FDI flows, globalization, and knowledge. This relationship is moderated by the index of electoral democracy, employment in agriculture, rent from natural resources, export diversification, and fertility. We employ a set of threshold regressions based on the idea that FDI levels will be significant and permanent as long as FDI transmits knowledge to recipient countries from a substantial level of FDI. The results show a threshold effect in the electoral democracy index and foreign direct investment at the global level and high- and upper-middle-income countries. In addition, we found a threshold effect for the electoral democracy index in the East Asia Pacific regions and the Middle East and North African countries. There is a threshold effect in East Asia, the Pacific, and Latin America in FDI. Based on the results, policymakers should promote FDI and electoral democracy flows above the threshold to encourage the transfer of human capital in the countries analyzed.

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“…A rise in markups from participation in GVCs is likely to increase firms' profits, but the distributions of GVC gains among factors may depend on their bargaining power. Wang et al (2018) assumed that skilled labour owners accept fair wages and have higher bargaining power. They found that deepening firms' participation in GVCs enlarges wage inequality as firms share the additional surplus generated by GVC participation more with skilled workers than unskilled workers.…”

Section: Global Value Chainsmentioning

confidence: 99%

“…They found the emergence of supply chains led to the degradation of the production stages of all Southern workers, which reduced wages of low-skill Southern workers but increased the wages of high-skill Southern workers, resulting in increased wage inequality. Wang et al (2018) pointed out that the upgrading of Chinese manufacturing firms in GVCs increased the productivity of skilled labour relative to unskilled labour and expanded wage inequality within firms.…”

Section: Global Value Chainsmentioning

confidence: 99%

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

Wenxiao

Findlay

Thangavelu

2021

Asian-Pac Economic Lit

Self Cite

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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.

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

Cited by 17 publications

References 65 publications

GVC and wage dispersion. Firm-level evidence from employee?employer database

GVC and wage dispersion. Firm-level evidence from employee?employer database

Heterogeneity in the Causal Link between FDI, Globalization and Human Capital: New Empirical Evidence Using Threshold Regressions

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

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