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Capital Flows, Vertical Multinationals, Wage Inequality, and Welfare
Author(s) -
Liang WenJung,
Mai ChaoCheng
Publication year - 2003
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00211
Subject(s) - economics , wage inequality , welfare , wage , inequality , labour economics , capital (architecture) , subsidiary , international economics , multinational corporation , market economy , geography , mathematical analysis , mathematics , archaeology , finance
Wage inequality between skilled and unskilled labor in the US and its trading partners, Mexico and Chile, has increased since 1980, while Taiwan's wage inequality has decreased since the mid‐1980s. The authors provide a new explanation for the latter, involving a rise in capital flows from Taiwan to less‐developed countries (LDCs) in the form of vertical multinationals (MNEs), and a corresponding rise in intermediate‐good exports from the MNEs to subsidiaries in LDCs. Moreover, national income in both countries definitely improves.