Business service, international outsourcing, and wage inequality
Journal
Singapore Economic Review
Journal Volume
63
Journal Issue
5
Pages
1175-1182
Date Issued
2018
Author(s)
Abstract
This paper adds business services to Feenstra and Hanson's (1996) model to show that if a country is more prosperous in business services, tending to carry out less international outsourcing activities than it would otherwise. In this model, the more varieties of specialized business services a country endows, the more welfare gains arise in the presence of positive production externalities to the manufacturing sector. Since developed countries are more prosperous in business service sector, this model helps to explain why the impact of opening trade on the dispersion of both wages and unemployment is stronger in developing economies. © 2018 World Scientific Publishing Company.
Subjects
business services; International outsourcing; wage inequality
Other Subjects
business; business service; development economics; equity; manufacturing; outsourcing; unemployment; wage gap
Type
journal article