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The effect of outward processing trade on wage inequality : the Hong Kong case
Journal of International Economics
  • Lok Sang HO, Lingnan University, Hong Kong
  • Xiangdong WEI, Lingnan University
  • Wai Chung, Gary WONG, Lingnan University
Document Type
Journal article
Publication Date
  • Wage inequality,
  • Outward processing trade,
  • Causality
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.
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Copyright © 2004 Elsevier B.V.

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Citation Information
Ho, L. S., Wei, X., & Wong, W. C. G. (2005). The effect of outward processing trade on wage inequality: The Hong Kong case. Journal of International Economics, 67(1), 241-257. doi: 10.1016/j.jinteco.2004.09.005