Services Offshoring and Wages: Evidence from Korean Manufacturing Industries

This paper investigates the effects of services offshoring on wages in Korean manufacturing industries from 1998 to 2010 using panel generalized method of moments. The main results of this econometric analysis show that the lagged services offshoring has both negative and significant effect on wages, while the current services offshoring have small negative but insignificant effect on wages in GMM-SYS estimation. This finding implies that services offshoring lowers wages in Korean manufacturing industries during the sample period. We also produce other supplementary results pertaining to the impacts ofmaterials offshoring, labor productivity, output-level, and trade specializationon wages. In particular, the results indicate that labor productivity and tradespecialization have both negative and significant effect on wages in Koreanmanufacturing over the full sample period.