Globalization, Trade & Wages: What Does History Tell Us About China?
60 Pages Posted: 25 Jan 2010 Last revised: 6 May 2023
Date Written: January 2010
Abstract
Chinese imports and exports grew rapidly during the first three decades of the twentieth century as China opened up to global trade. Using a new data set on the factor-intensity of traded goods at the industry level, we show that Chinese exports became more unskilled-intensive and imports became more skill-intensive during these three decades. The exogenous shock of World War I dramatically raised the price of Chinese exports and increased the demand for these goods overseas and for unskilled workers producing these goods in China. When the war ended, trade costs declined, leading to a rise in China's terms of trade and further growth in China's export sector. Difference-in-differences regression estimates show that World War I boosted exports in China and did so substantially more for unskilled industries than skilled industries. We show that the observed decline in the skill premium in China is consistent with China's changing terms of trade. The skill-unskilled wage ratio flattened out during the 1910s and then fell by eight percent during the 1920s. We simulate the effects of World War I using a dynamic, general equilibrium factor-endowments model of trade, and demonstrate that an exogenous shock to the price of traded goods can produce a decline in the skill premium similar to what China experienced in the 1920s.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector
-
Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector
-
Trade, Technology, and Wage Inequality
By Gordon H. Hanson and Ann E. Harrison
-
Who Gains from Trade Reform? Some Remaining Puzzles
By Ann E. Harrison and Gordon H. Hanson
-
Trade Liberalization and Firm Productivity: The Case of India
-
Distributional Effects of Globalization in Developing Countries
By Pinelopi Goldberg and Nina Pavcnik
-
Trade Reforms and Wage Inequiality in Colombia
By Orazio Attanasio, Pinelopi Goldberg, ...
-
Trade Reforms and Wage Inequality in Colombia
By Orazio Attanasio, Pinelopi Goldberg, ...
-
By Pinelopi Goldberg and Nina Pavcnik
-
By Pinelopi Goldberg and Nina Pavcnik