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Capital Flows, Vertical Multinationals, Wage Inequality, and Welfare

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  • Wen‐Jung Liang
  • Chao‐Cheng Mai

Abstract

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.

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  • Wen‐Jung Liang & Chao‐Cheng Mai, 2003. "Capital Flows, Vertical Multinationals, Wage Inequality, and Welfare," Review of Development Economics, Wiley Blackwell, vol. 7(4), pages 599-608, November.
    • Handle: RePEc:bla:rdevec:v:7:y:2003:i:4:p:599-608
    DOI: 10.1111/1467-9361.00211
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    Cited by:

    1. Bruno Decreuse & Paul Maarek, 2015. "FDI and the Labor Share in Developing Countries : A Theory and Some Evidence," Annals of Economics and Statistics, GENES, issue 119-120, pages 289-319.
    2. Paolo Figini & Holger Go¨rg, 2011. "Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation," The World Economy, Wiley Blackwell, vol. 34(9), pages 1455-1475, September.
    3. Raihan, Selim, 2021. "Functional Income Distribution and Inequality in the Asia-Pacific Countries," MPRA Paper 110469, University Library of Munich, Germany.
    4. Raihan, Selim, 2022. "What Does Data on Functional Income Distribution tell us about Trends in and Correlates of Income Inequality in The Asia-Pacific?," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 45-64.
    5. Jiancai Pi & Yu Zhou, 2015. "The impacts of corruption on wage inequality and rural–urban migration in developing countries," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(3), pages 753-768, May.

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