After China joined the WTO in 2001, the trade barriers between US and China decreased significantly.

After China joined the WTO in 2001, the trade barriers between US and China decreased significantly. How would the relative wage of skilled workers to unskilled workers change in China according to the outsourcing model? Explain.

Expert Solution

Outsourcing is when one gets their work done somewhere out at other place for it lower cost offering. Generally bigger companies such as apple, Samsung prefer to have their production work done in China due to it's lower cost of production. Due to abundance of work the wage rate in China is expected to increase than usual for both skilled and unskilled but as China has world's largest population and a lot of unskilled labours therefore, the wage of unskilled labours won't rise due to excess supply of labour whereas the wages of skilled labours will increase as there are limited skilled labours and their wages will increase according to their demand.

Also the decrease in trade barriers allowed China to expert to US as well hence production work will increase and so will the wages for skilled labours

Rahul Sunny answered 2 years ago

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