Imported intermediate goods embedded technology and intra-firm skill premiums

MingRong Wang and XinYue Liu

Economic Analysis and Policy, 2025, vol. 86, issue C, 673-691

Abstract: With China’s increasing integration into the global value chain, the technology embedded in imported intermediate goods has emerged as a pivotal factor influencing the skill premium within enterprises by altering the allocation of skilled and unskilled labor inputs in domestic firms. This study leverages merged data from the World Input–Output Database (WIOD), the Chinese Industrial Enterprise Database, and the customs database to empirically investigate the impact of technology embedded in imported intermediate goods on the overall and “dual” skill premiums within Chinese enterprises through the mechanism of intermediate goods industry upgrading. In this context, the overall skill premium denotes the wage disparity between skilled and unskilled labor within enterprises. The “dual” skill premium encompasses both within-group and between-group components. The between-group skill premium arises from discrepancies in observable attributes (e.g., educational attainment, productive efficiency), whereas the within-group skill premium stems from the heterogeneity of unobservable factors (e.g., capabilities, aptitudes) among individuals with identical observable characteristics. The findings reveal that the technology embedded in imported intermediate goods exerts a significant and robust dampening effect on both the overall and “dual” skill premiums within enterprises, with a more pronounced reduction in the within-group skill premium compared to the between-group skill premium. This dampening effect exhibits significant heterogeneity across production sectors, enterprise skill premium quantiles, ownership types, and industry upstreamness. Mechanism tests indicate that the technology embedded in imported intermediate goods reduces the overall and “dual” skill premiums within enterprises by inhibiting the upgrading of domestic intermediate goods industries. The conclusions of this study provide crucial empirical evidence and policy insights for coordinating the high-quality development of intermediate imported goods trade and refining the income distribution system.

Keywords: Embedded Technology of Imported Intermediate Goods; Overall Skill Premium; Between-Group Skill Premium; Within-Group Skill Premium; Industry Upgrading (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:86:y:2025:i:c:p:673-691

DOI: 10.1016/j.eap.2025.03.051

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