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Would Outsourcing Increase or Decrease Wage Inequality? Two Models, Two Answers

Author

Listed:
  • Wenli Cheng
  • Dingsheng Zhang
Abstract
This paper develops two models to study the impact of outsourcing on wage inequality between skilled and unskilled labor in the developed country and the developing country. The first model assumes symmetric production technologies in both countries, and predicts that outsourcing will increase wage inequality in the developed country, but decrease wage inequality in the developing country. The second model assumes asymmetric technologies in the production of the intermediate good and predicts that outsourcing can lead to an increase in wage inequality in both the developed country and the developing country.

Suggested Citation

  • Wenli Cheng & Dingsheng Zhang, 2005. "Would Outsourcing Increase or Decrease Wage Inequality? Two Models, Two Answers," Monash Economics Working Papers 20/05, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2005-20
    as

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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2005/2005outsourcingandwageinequality.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    wage inequality; endogenous outsourcing;

    JEL classification:

    • F19 - International Economics - - Trade - - - Other

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