The Impacts of Trade Openness and Human Capital on Manufacture Wage Gap in China An Empirical Analysis Based on Threshold Effect Model

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1 POPULATION & ECONOMICS No Tot. No ~ F244 A The Impacts of Trade Openness and Human Capital on Manufacture Wage Gap in China An Empirical Analysis Based on Threshold Effect Model LIANG Ying 1 2 LI Jin-ling 2 1. School of International Trade and Economics Central University of Finances and Economics Beijing China 2. Business School Inner Mongalia Finance and Economics University Huhehaote China Abstract Based on the panel data of 28 provinces during 1998 ~ 2010 the paper analyze the threshold effect of the human capital on the trade openness to high-skilled labor and low-skilled labor s manufacture wage gap in China through the threshold effect model. The results of the study show that the human capital has a single threshold when trade openness and export openness are the dependant variables. As long as the human capital is higher than threshold value trade openness can

2 broaden the wage gap. While the human capital is lower than threshold value trade openness will narrow the wage gap significantly. As the same time the human capital has double threshold effect to the dependents variables of import openness. As long as the human capital is higher than threshold value import openness can broaden the wage gap significantly. But this expansion becomes no longer significant while the human capital is lower than threshold value. To threshold value of trade openness there are 17 provinces belongings to the lower human capital area and 11 provinces belongings to the higher human capital area in Keywords trade openness human capital wage cap threshold effect model % Stolper-Samuelson Theorem S - S Wood Leamer 2 ~ 3 Freeman and Oostendorp H-O-S 3 4 Krugman OECD GDP 2% H-O-S 5 Feenstra & Hanson 6 Acemoglu 7 ~ 8 Helpman 9 S-S Heckscher Ohlin H-O H-O S-S H-O-S 76

3 10 Haral Beyer 11 Reshef H-O-S 12 Goldberg & Pavcnik 13 Robertson 14 Green & Dickerson ~ ~ ~ ~ ~ %

4 q i r q i r q i > r Hansen 31 WAGE it = C + β 1 FDI it + β 2 RD it + β 3 UNE it + α 1 OPEN it I HUM it r + α 2 OPEN it I HUM it > r ε it 1 1 WAGE it = C + β 1 FDI it + β 2 RD it + β 3 UNE it + α 1 EXP it I HUM it r + α 2 EXP it I HUM it > r ε it 2 WAGE it = C + β 1 FDI it + β 2 RD it + β 3 UNE it + α 1 IMP it I HUM it r + α 2 IMP it I HUM it > r ε it 3 I ~ Stata11 1 WAGE Avalos et 50% 50% ~ % 12 50% OPEN EXP IMP GDP GDP GDP

5 HUM UNE J ntti 33 2 FDI GDP 1978 GDP 3 R&D R&D GDP R&D 1. F Bootstrap P 1 1 F P BS 1% 5% 10% *** *** *** *** *** ** * 1% 5% 10% 1% 1% % HUM > HUM w h /w 1 it = C + β 1 FDI it + β 2 RD it + β 3 UNE it + α 1 IM it I HUM it r 1 + α 2 IM it I r 1 < HUM it r 2 + α 3 IM it I HUM it > r 2 + ε it 79

6 % I HUM r I HUM > r 80

7 4 FDI R&D UNE I HUM r I HUM > r I HUM r 1 I r 1 < HUM r 2 I HUM > r *** *** *** * *** *** *** ** *** *** *** *** R P *** ** * 1% 5% 10% I HUM r 1 I r 1 < HUM r 2 I HUM > r 2 FDI FDI 1% FDI R&D 81

8 ~ FDI ~ 37 1 Xu B. and Li W. Trade Technology and China s Rising Skill Demand J. Economics of Transition Wood A. Openness and Wage Inequality in Developing Countries The Latin American Challenge to East Asian Conventional Wisdom J. The World Bank Economic Review Leamer Edward E. What s the Use of Factor Contents J. Journal of International Economics Freeman Richard B. and Ostendorp Remco. Wages around the World Pay across Occupations and Countries R. NBER Working Paper No Krugman Paul R. Technology Trade and Factor Prices J. Journal of International Economics Feenstra Robert C. and Gordon H. Hanson. Productivity Measurement and the Impact of Trade and Technology on Wages Estimates for the U. S J. Quarterly Journal of Economics Acemoglu Daron. Changes in Unemployment and Wage Inequality An Alternative Theory and Some Evidence J. The American Economic Review AER Acemoglu Daron. Labor and Capital_ Augmenting Technical Change J. Journal of the European Economic Association Helpman Elhanan Oleg Itskhoki Stephen Redding. Wages Unemployment and Inequality with Heterogeneous Firms and Workers R. NBER Working Paper No Xu Bin. 82 Trade Liberalization Wage Inequality and Endogenously Determined Non-traded Goods J. Journal of International Economics

9 Beyer Harald Patricio Rojas Rodrigo Vergara. Trade Liberalization and Wage Inequality J. Journal of Development Economics Reshef A. Heckscher-ohlin and the Global Rise of Skill Premia Factor Intensity Reversals to the Rescue R. Manuscript New York University Goldberg Pinelopi and Pavcnik Nina. Trade Liberalization and Industry Wage Structure Evidence from Brazil J. World Bank Econ Rev Robertson Raymond. Relative Prices and Wage Inequality Evidence from Mexico J. Journal of International Economics Green Francis and Dickerson Andy. A Picture of Wage Inequality and the Allocation of Labor through a Period of Trade Liberalization The Case of Brazil J. World Development J J J J J FDI J J J J J R&D J J J J J Hansen B. Threshold Effects in Non-Dynamic Panels Estimation Testing and Inference J. Journal of Economics Avalosa Savviedsa. The Manufacturing Wage Inequality in Latin America and East Asia Openness Technology Transfer and Labor Supply J. Review of Development Economics J ntti. A More Efficient Estimate of the Effects of Macroeconomic Activity on the Distribution of Income J. The Review of Economics and Statistics J

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