Abstract
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 language | English |
|---|---|
| Pages (from-to) | 241-257 |
| Number of pages | 17 |
| Journal | Journal of International Economics |
| Volume | 67 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 1 Sept 2005 |
Funding
We thank Jonathan Eaton and an anonymous referee for their valuable comments. We are responsible for any remaining errors.
Keywords
- Causality
- Outward processing trade
- Wage inequality