Human Capital And International Service Outsourcing

Since 1990s', the rapid development of information technology and the decrease of communication cost make a lot of Non-Tradable services tradable. So after the international transfer of manufacture industry, the international transfer of service has become the mainstream of global industrial adjustment, in which international service outsourcing is the primary growing factor. International service outsourcing is located at the high end of service industry. It not only has high additional value and employment creativity as well as low resource consumption and environmental pollution, but also advantage for skill accumulation due to its closeness with information technology and openness of internationality. Therefore, international service outsourcing would bring great benefit for China's economic and social development. This paper attempts to analyze the decisive factor of international service outsourcing from the perspective of host country and tries to provide useful suggestions to increase China's competence in international service outsourcing market.The first chapter opens with the theoretical and realistic meaning of international service outsourcing, followed by chapter two with a detailed summary of current research on the subject. In chapter three I compare the human capital endowment of different countries and study the correlation between human capital and service outsourcing to demonstrate that human capital decide a country's comparative advantage in services.In chapter four we develop a theoretical model to how a country's human capital level would affect its competence in international service outsourcing. We find that human capital have positive effect on a country's service-outsourcing related export while for developed countries negative effect exist. In chapter five we further investigate how international service outsourcing affects the wages of agents with different human capital. Our model shows that international service outsourcing would increase the host country's national income as well as the wage of those agents with relative low human capital.In chapter six we study the software outsourcing in India and China. We find that though there is no substantial difference between China and India's economic competence, China lags far behind India in software outsourcing. This fact shows that India's comparative advantage in human capital determine its competence in software outsourcing. In the conclusion, I summarize the current status of China's human capital and point out that it is very crucial for China to improve its human capital accumulation in order to increase its competence in international service outsourcing.