Technology and outsourcing: An explanation to the rising wage gap

Sahana Roy Chowdhury

Economic Modelling, 2010, vol. 27, issue 1, 380-387

Abstract: The recent phenomenon of widening skilled-unskilled wage gap in both North and South has been either explained by a technological change or by increasing trade or globalization. The paper provides a new explanation and emphasizes that it is neither technology nor trade alone but both that have contributed to the widening wage inequality. It argues, using a two-country occupational choice model, that any technological improvement in North results in a rise in the skilled-unskilled wage gap in North via an increase in the productivity of skilled labor followed by a rise in the same in South via trade or the outsourcing activities of the northern firms. The extent of outsourcing or the number of northern firms that outsource jobs to South is endogenously determined in the model. The paper also analyzes some major economic impacts of such a technological upgradation in North on the southern economy.

Keywords: Occupational; choice; Outsourcing; Technological; improvement; Wage; gap; Wealth; inequality (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264-9993(09)00176-X
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:27:y:2010:i:1:p:380-387

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().