Offshoring and Wage Inequality: Theory and Evidence from China

Abstract

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Foreign direct investment and inequality: Evidence from China's policy change

“…They show that ownership structure can affect FDI’s relative labour demand and thus the role FDI has for inequality. Our paper differs from their research in that it emphasises a city‐level analysis and also investigates the wage effect and spillover effect of FDI liberalisation through which local skill premium can be affected, an analysis that is absent in Sheng and Yang (). Specifically, we examine whether FDI liberalisation only changes the spatial distribution of labour (i.e., the composition effect), if FDI firms also reward skills differently from domestic firms (i.e., the wage effect), or if FDI liberalisation can affect wages received by skilled and unskilled labour differently in general (i.e., the spillover effect).…”

“…Our paper is most closely related to Sheng and Yang (), who focus on offshoring and wage inequality in China. They show that ownership structure can affect FDI’s relative labour demand and thus the role FDI has for inequality.…”

Value‐added exports and the skill premium: Evidence from China’s international and regional production networks

“…Second, rising return to education has been well-documented and is a focus of study in China (e.g., Ge & Yang, 2014). Specifically, Han, Liu, and Zhang (2012), Sheng and Yang (2016), Li, Li, andMa (2016), andChen, Yu, and have explored the impact of trade on the skill premium through different dimensions of trade liberalization. Finally, China is a large and spatially diverse country with an intertwined domestic production network.…”

“…The former measures value-added generated by de jure exporters, while the latter reflects the economic activities of indirect/induced exporters. Following the local labour market approach (e.g., Acemoglu, Autor, Dorn, Hanson, & Price, 2016;Autor, Dorn, & Hanson, 2013;Sheng & Yang, 2016), we estimate an augmented Mincer equation using 2005 China Population Census data. We define the log income differential between college and non-college graduates as the skill premium.…”

The Skill Structure of Export Wage Premium: Evidence from Chinese Matched Employer–Employee Data

“…China is the world's largest developing country and also the largest exporting country, making it a perfect candidate to study the distributional effects of exports in developing countries. Second, the wage gap between skilled and unskilled workers in China has been rising rapidly since China's accession into the WTO in 2001 (Sheng and Yang, ), suggesting that export expansion may have had a substantial contribution to China's recent rising inequality. However, detailed firm‐level investigation is still lacking because wage information by skill groups is rarely available in Chinese firm‐level data sets.…”