Title: Offshoring and Wage Inequality: Theory and Evidence from China

Speaker: Assistant Professor Liugang Sheng, Chinese University of Hong Kong

Time: September 2nd, 2016 14:30–15:30 

Venue: Room 102, Zhonghui Building (College of Economics, JNU)

About the speaker:

Professor Liugang Sheng is an Assistant Professor of the Department of Economics at the Chinese University of Hong Kong. He is also the director of the Trade and Development Programme of the Economic Research Centre of the Hong Kong Institute of Asia-Pacific Studies. Prof. Sheng received his PhD in Economics from the University of California, Davis in 2012. His research interests cover international trade, international macroeconomics, and economic development. His papers have been published in, or accepted by many reputable international and Chinese journals including Quarterly Journal of Economics, Journal of Development Economics, Journal of Applied Econometrics, Pacific Economic Review, China Economic Quarterly, and Law and Social Sciences. 

Abstract:

We develop a global production sharing model that integrates the frameworks of ownership structure of offshoring and the determination of relative wages in developing countries. The model shows that FDI offshoring contributes more prominently than arm’s length outsourcing to the demand for skill in the South, which raises the returns to education. By incorporating these theoretical results into an augmented Mincer earnings function, we test the model using a natural experiment in which China lifted its restrictions on foreign ownership of FDI upon its accession to the WTO. Empirical findings based on detailed Urban Household Surveys and trade data from Chinese customs provide support to the proposed theory, thus shedding light on the changes in firm ownership structure, the skill content of exports, and the evolution of wage inequality for the period of 1992-2008 in China.