This paper investigates how much skill-biased technological change and
global outsourcing can account for income disparity between skilled and
unskilled workers in Korea. To this end, the panel data for 62 industries
incorporating the manufacturing and service sectors are compiled for the period
from 1990 to 2007 and three methods are applied: (i) factor decomposition for
inter and intra industrial variations; (ii) estimation of translog cost function;
and (iii) estimation of mandated wage equation. The estimation results overall
indicate that skill-biased technological change plays a major role in the
increase in the demand for skilled workers, which directly leads to the
persistent increase in the skill premium. In the meantime, global outsourcing
explains 30-40% of the increase in the demand for skilled workers with its
growing effect since the 1997 Asian Crisis.