Global Outsourcing and Wage Inequality in Middle-Income Countries: Evidence from South Korea

Hongshik Lee, Soonhyung Sim

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


A substantial number of studies have suggested that global outsourcing can induce wage inequality. As Feenstra and Hanson [(1996a) Foreign investment, outsourcing, and relative wage, in: R. C. Feestra, G. M. Hanson, and D. A. Irwin (Eds.) Political Economy of Trade Policy: Essays in Honor of Jagdish Bhagwati (Cambridge: The MIT Press), pp. 89–127] argued, global outsourcing is comparable to skill-biased technological change in that global outsourcing is more likely to increase the wage of skilled workers rather than their unskilled counterparts. We examine the effects of outsourcing on wage of skilled and unskilled workers in Korea's manufacturing sector with a focus on the dissimilar effects of outsourcing to developed countries (DCs) and less developed countries (LDCs) on relative wage. The results of system and difference GMM estimation based on manufacturing data from 1992 to 2006 indicate that outsourcing to DCs and LDCs have opposite (and significant) effects on relative wage, that is, outsourcing to DCs (LDCs) decreases the wage of skilled (unskilled) workers.

Original languageEnglish
Pages (from-to)19-41
Number of pages23
JournalGlobal Economic Review
Issue number1
Publication statusPublished - 2016 Jan 2

Bibliographical note

Funding Information:
We would like to thank seminar participants at the Singapore Economic Review Conference (SERC) in Singapore in 2011. All responsibility for any errors remains our own. This work was supported by National Research Foundation of Korea Grant funded by the Korean Government (NRF-2011-332-B00064).

Publisher Copyright:
© 2015 Institute of East and West Studies, Yonsei University, Seoul.


  • Global outsourcing
  • middle income country
  • system GMM
  • wage inequality

ASJC Scopus subject areas

  • Business and International Management
  • Economics, Econometrics and Finance(all)
  • Political Science and International Relations


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