The effect of outward processing trade on wage inequality : the Hong Kong case

Research output: Journal PublicationsJournal Article (refereed)

5 Citations (Scopus)


This study uses time series analysis to investigate the impact of Hong Kong's increased outward processing trade with the Chinese Mainland on wage inequality. We found a significant positive association between outward processing trade and the wage premium of university graduates over primary school graduates and that over secondary school graduates. Moreover, a standard test showed one-way causality from outward processing trade to the widening of skill wage gap. Furthermore, the increase of outward processing trade is found to both increase the pay for well-educated people and decrease the pay for less well-educated people, thereby widening the wage gap.
Original languageEnglish
Pages (from-to)241-257
Number of pages17
JournalJournal of International Economics
Issue number1
Publication statusPublished - 1 Sep 2005



  • Causality
  • Outward processing trade
  • Wage inequality

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