The Research On Outsourcing Trade And Wage Gap

In the context of international vertical specialization, outsourcing trade is one ofthe most important international economic phenomena since the1950s. Since thereform and opening up, China has become an important participant in this activity bythe way of processing trade, but the phenomenon of low labor remuneration andwidening wage gap of workers is in China is worrying. Studies have shown that withthe rising level of international division of labor, the outsourcing of intermediateproducts has increased considerably, which is likely to be the key factor to cause theexpansion of wage gap between skilled labor and unskilled labor in variouscountries. Therefore, researching the impact of outsourcing on the wage gap in Chinais of great practical significance.After collecting and summarizing the literature on international verticalspecialization and the wage gap, the status quo of outsourcing trade and the wage gapof China’s industrial sectors are described. Based on the three-factor model ofFeenstra R C et al（1997）,this paper first analyzes the theoretical mechanism of theimpact of international outsourcing on wage gap between skilled labor and unskilledlabor in developed and developing countries. It then makes an empirical study on howoutsourcing activities affects the wage gap in overall and sub-sectors of China’sindustry by using our country’s industrial panel data. We find that internationaloutsourcing and technological progress both have significant positive effect on theexpansion of wage gap in China’s industrial sectors, but outsourcing activities hasrelatively stronger effect in the labor resources-intensive sector and themedium-technology sector. In recent years, the importance of outsourcing trade whichChina participates in by the way of processing trade is becoming more and moreimportant. Coupled with our constantly oriented industrial policy to encourageindustrial upgrading and technological progress, they jointly promote the expansionof wage gap between skilled labor and unskilled labor. In this context, China shoulddevelop effective income distribution policy to better deal with the relationshipbetween efficiency and equity.