Effects of position in the global value chain on Wages

This study analyses the impact of Korean manufacturing's position in the global value chain on wages, i.e., estimates the impact of the relative position of Korean manufacturing on the smile curve, which represents the relationship between production stage and value added in the global value chain. The main findings of the analysis are as follows. First, we find that wages are higher at the top and bottom of the value chain in Korean manufacturing. Second, we estimate an interaction between occupational category and the smile curve and find that the wage effect of the smile curve is pronounced for production workers, but not for white collar workers. For production workers, wages are relatively higher at the top and bottom of the value chain, meaning that even within the same production occupation, there are differences in wages depending on the position in the manufacturing value chain. This suggests that productivity and wages need to improve in the middle of the value chain to mitigate the wage polarisation within the same occupation in manufacturing.