The Wage Effects of Material and Service Offshoring: Evidence From South Korea

Yang Shen and Myunghwan Yoo

The World Economy, 2025, vol. 48, issue 9, 2018-2041

Abstract: Using commodity‐level input–output tables with detailed import matrices for South Korea, we construct a direct industry‐level measure of offshoring, avoiding the proportionality assumption common in prior studies. Comparing measures with and without this assumption, we reveal significant disparities, particularly in service offshoring. Integrating this measure with individual‐level worker data, we estimate the wage effects of material and service offshoring between 2005 and 2014. Both industry‐ and occupation‐level material offshoring increase wages, whereas service offshoring has positive effects only when measured directly. Occupation‐level offshoring consistently has larger wage effects than industry‐level offshoring. Using two‐stage least squares, we find that a one‐percentage‐point increase in occupation‐level service offshoring raises wages by 2.094%. Our heterogeneity analysis reveals that material offshoring widens the gender wage gap, while service offshoring reduces the skill premium. Moreover, service workers and those who remain in the same occupation benefit the most from wage increases driven by service offshoring.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/twec.70003

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:48:y:2025:i:9:p:2018-2041

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().