Reverse Outsourcing and Skill-biased Technical Change

Abstract

Under the background of China's New Normal and new industrial revolution, China's economy urgently needs to realize the transformation of economic growth and upgrading of industrial structure through technical innovation, especially skill-biased technical change. According to the stylized facts that firms speed up overseas mergers and acquisitions in the post-financial crisis, this paper constructs a general equilibrium model including reverse outsourcing based on Ricardo framework, and theoretically confirms that reverse outsourcing as a new method of gathering global innovation resources by late-development countries can make up for a shortage of high-skilled labor in late-development countries and induce enterprises to use skill-labor-biased production technology, thereby playing a promotion role in skill-biased technical change in late-development countries. Based on the data of 16 sub-industries in manufacturing from 2003 to 2011, empirical analysis shows that reverse outsourcing dominated by local manufacturing enterprises significantly promotes skill-biased technical change in manufacturing, and FDI & the increase in human capital supply accelerate the formation and development of skill-biased technical change. This paper not only enriches current globalization theories about skill-biased technical change and reverse outsourcing, but also has important enlightenment to the transformation of new manufacturing mode and the adjustment to economic structure in China.