Service Links and Wage Inequality

• Main Authors: HO, Kong Weng, HOON, Hian Teck
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2003
• Subjects: Production Fragmentation; Service Links; Wage Inequality; Singapore; Technological Progress; Asian Studies; Labor Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/771; https://ink.library.smu.edu.sg/context/soe_research/article/1770/viewcontent/ho_hoon.pdf
• Institution: Singapore Management University

In our general equilibrium model, the variety of specialized service links affects international production fragmentation in manufacturing. Decreases in cost of education or fixed cost of service links raise the relative supply of skilled workers, increase service specialization, and decrease the price of aggregate services. Consequently, the market for service- and skill-intensive component manufacturing enlarges, raising relative demand for skilled workers. Empirically, endogenous change in international outsourcing rather than skill-biased technological progress is the main reason for a modest decline in wage gap despite the rapid rise in relative supply of skilled workers in Singapore from 1978 to 2000.