[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v46y2017icp97-109.html
   My bibliography  Save this article

Tariffs, relative prices and wage inequality: Evidence from China

Author

Listed:
  • Xu, Yun
  • Ouyang, Alice Y.
Abstract
This paper, based on data from China after its membership into the World Trade Organization (WTO), shows the co-existence of a fluctuating skill premium and rises in wages for both skilled and unskilled labor. Our research provides one specific factor, the tariff reduction biased toward unskilled labor-intensive sectors, to explain and quantify the magnitudes of skill premium dynamics using the mandated-wage approach. The empirical evidence indicates that sector-biased tariff reductions have widened wage inequality in China through their effect on product prices. World price competition, on the other hand, has contributed to declining wage inequality via product prices, which is consistent with the endowment-based expectations of China's integration into the more skilled-labor abundant world.

Suggested Citation

  • Xu, Yun & Ouyang, Alice Y., 2017. "Tariffs, relative prices and wage inequality: Evidence from China," China Economic Review, Elsevier, vol. 46(C), pages 97-109.
    • Handle: RePEc:eee:chieco:v:46:y:2017:i:c:p:97-109
    DOI: 10.1016/j.chieco.2017.08.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X17301207
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.chieco.2017.08.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wei Zou & Lan Liu & Ziyin Zhuang, 2009. "Skill Premium, Biased Technological Change and Income Differences," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(6), pages 64-87, November.
    2. Gordon H. Hanson & Ann Harrison, 2022. "Trade Liberalization And Wage Inequality In Mexico," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 3, pages 43-60, World Scientific Publishing Co. Pte. Ltd..
    3. Harris, Richard G. & Robertson, Peter E., 2013. "Trade, wages and skill accumulation in the emerging giants," Journal of International Economics, Elsevier, vol. 89(2), pages 407-421.
    4. Fleisher, Belton & Li, Haizheng & Zhao, Min Qiang, 2010. "Human capital, economic growth, and regional inequality in China," Journal of Development Economics, Elsevier, vol. 92(2), pages 215-231, July.
    5. Barua, Alokesh & Pant, Manoj, 2014. "Trade and wage inequality: A specific factor model with intermediate goods," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 172-185.
    6. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    7. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    8. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    9. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," The World Bank Economic Review, World Bank, vol. 11(1), pages 33-57, January.
    10. Robert C. Feenstra & Gene M. Grossman & Douglas A. Irwin (ed.), 1996. "The Political Economy of Trade Policy: Papers in Honor of Jagdish Bhagwati," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061864, December.
    11. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "The Effects of the Colombian Trade Liberalization on Urban Poverty," NBER Chapters, in: Globalization and Poverty, pages 241-290, National Bureau of Economic Research, Inc.
    12. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
    13. Anwar, Sajid & Sun, Sizhong, 2012. "Trade liberalisation, market competition and wage inequality in China's manufacturing sector," Economic Modelling, Elsevier, vol. 29(4), pages 1268-1277.
    14. Bin Xu & Wei Li, 2008. "Trade, technology, and China's rising skill demand1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(1), pages 59-84, January.
    15. Harrison, Ann & McLaren, John & McMillan, Margaret S., 2010. "Recent findings on trade and inequality:," IFPRI discussion papers 1047, International Food Policy Research Institute (IFPRI).
    16. Alan V. Deardorff, 2001. "Does Growth Encourage Factor Price Equalization?," Review of Development Economics, Wiley Blackwell, vol. 5(2), pages 169-181, June.
    17. Fu, Dahai & Wu, Yanrui, 2013. "Export wage premium in China's manufacturing sector: A firm level analysis," China Economic Review, Elsevier, vol. 26(C), pages 182-196.
    18. Domberger, Simon & Fiebig, Denzil G, 1993. "The Distribution of Price Changes in Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 41(3), pages 295-313, September.
    19. Xiang, Chong, 2007. "Diversification cones, trade costs and factor market linkages," Journal of International Economics, Elsevier, vol. 71(2), pages 448-466, April.
    20. Elena Ianchovichina & Will Martin, 2004. "Impacts of China's Accession to the World Trade Organization," The World Bank Economic Review, World Bank, vol. 18(1), pages 3-27.
    21. Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
    22. Pi, Jiancai & Zhang, Pengqing, 2016. "Hukou system reforms and skilled-unskilled wage inequality in China," China Economic Review, Elsevier, vol. 41(C), pages 90-103.
    23. repec:bla:rdevec:v:5:y:2001:i:2:p:169-81 is not listed on IDEAS
    24. Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Have Falling Tariffs and Transportation Costs Raised US Wage Inequality?," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 630-650, September.
    25. Yun Xu & Ouyang, 2015. "China wage inequality: the role of trade and technology," Applied Economics, Taylor & Francis Journals, vol. 47(47), pages 5057-5071, October.
    26. Esquivel, Gerardo & Rodriguez-Lopez, Jose Antonio, 2003. "Technology, trade, and wage inequality in Mexico before and after NAFTA," Journal of Development Economics, Elsevier, vol. 72(2), pages 543-565, December.
    27. Haskel, Jonathan & Slaughter, Matthew J, 2001. "Trade, Technology and U.K. Wage Inequality," Economic Journal, Royal Economic Society, vol. 111(468), pages 163-187, January.
    28. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
    29. Zhang, Anming & Zhang, Yimin & Zhao, Ronald, 2002. "Profitability and productivity of Chinese industrial firms: Measurement and ownership implications," China Economic Review, Elsevier, vol. 13(1), pages 65-88.
    30. Xiaohua Bao & Larry D. Qiu, 2010. "Do Technical Barriers to Trade Promote or Restrict Trade? Evidence from China," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 17(3), pages 253-278.
    31. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    32. Alyson C. Ma, 2006. "Geographical Location of Foreign Direct Investment and Wage Inequality in China," The World Economy, Wiley Blackwell, vol. 29(8), pages 1031-1055, August.
    33. Zhao, Yaohui, 2001. "Foreign direct investment and relative wages: The case of China," China Economic Review, Elsevier, vol. 12(1), pages 40-57.
    34. Wu, Xiaodong, 2001. "Foreign direct investment, intellectual property rights, and wage inequality in China," China Economic Review, Elsevier, vol. 11(4), pages 361-384.
    35. Imbruno, Michele, 2016. "China and WTO liberalization: Imports, tariffs and non-tariff barriers," China Economic Review, Elsevier, vol. 38(C), pages 222-237.
    36. Hamid Beladi & Ravi Batra, 2004. "Traded and Nontraded Goods and Real Wages," Review of Development Economics, Wiley Blackwell, vol. 8(1), pages 1-14, February.
    37. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/generalized method of moments estimation and testing," Stata Journal, StataCorp LP, vol. 7(4), pages 465-506, December.
    38. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June.
    39. Gregory K. Pompelli & Daniel H. Pick, 1990. "Pass-Through of Exchange Rates and Tariffs in Brazil—U.S. Tobacco Trade," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 676-681.
    40. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    41. Donald R. Davis & Prachi Mishra, 2007. "Stolper-Samuelson Is Dead: And Other Crimes of Both Theory and Data," NBER Chapters, in: Globalization and Poverty, pages 87-108, National Bureau of Economic Research, Inc.
    42. Dinopoulos, Elias & Syropoulos, Constantinos & Xu, Bin & Yotov, Yoto V., 2011. "Intraindustry trade and the skill premium: Theory and evidence," Journal of International Economics, Elsevier, vol. 84(1), pages 15-25, May.
    43. Donald J. Robbins, 1996. "Evidence on Trade and Wages in the Developing World," OECD Development Centre Working Papers 119, OECD Publishing.
    44. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
    45. L. Alan Winters, 2015. "Trade Liberalisation and Poverty: What are the Links?," World Scientific Book Chapters, in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 13, pages 241-269, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jonas F. Rudsinske, 2023. "How unilateral tariffs harm workers under oligopoly," The World Economy, Wiley Blackwell, vol. 46(9), pages 2732-2754, September.
    2. Rudsinske, Jonas F., 2020. "How protectionism harms workers under oligopoly," University of Göttingen Working Papers in Economics 407, University of Goettingen, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anwar, Sajid & Sun, Sizhong, 2012. "Trade liberalisation, market competition and wage inequality in China's manufacturing sector," Economic Modelling, Elsevier, vol. 29(4), pages 1268-1277.
    2. Yoshimichi Murakami, 2018. "Globalization and Income Inequality in Latin America: A Review of Theoretical Developments and Recent Evidence," Discussion Paper Series DP2018-16, Research Institute for Economics & Business Administration, Kobe University, revised Aug 2018.
    3. Esquivel, Gerardo & Rodriguez-Lopez, Jose Antonio, 2003. "Technology, trade, and wage inequality in Mexico before and after NAFTA," Journal of Development Economics, Elsevier, vol. 72(2), pages 543-565, December.
    4. Lorenzo Rotunno & Adrian Wood, 2015. "Wages and endowments in a globalised world," Economics Papers 2015-W11, Economics Group, Nuffield College, University of Oxford.
    5. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    6. Giordano, Paolo & Li, Kun, 2012. "An Updated Assessment of the Trade and Poverty Nexus in Latin America," IDB Publications (Working Papers) 4209, Inter-American Development Bank.
    7. Lanouar Charfeddine & Zouhair Mrabet, 2015. "Trade liberalization and relative employment: further evidence from Tunisia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 173-202, June.
    8. Atolia, Manoj & Kurokawa, Yoshinori, 2016. "The impact of trade margins on the skill premium: Evidence from Mexico," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 895-915.
    9. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    10. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
    11. Rotunno, Lorenzo & Wood, Adrian, 2020. "Wage inequality and skill supplies in a globalised world," Journal of Comparative Economics, Elsevier, vol. 48(3), pages 529-547.
    12. Roberto Álvarez & Ricardo A. López, 2009. "Skill Upgrading and the Real Exchange Rate," The World Economy, Wiley Blackwell, vol. 32(8), pages 1165-1179, August.
    13. Roberto Álvarez & Ricardo A. López, 2009. "Skill Upgrading and the Real Exchange Rate," The World Economy, Wiley Blackwell, vol. 32(8), pages 1165-1179, August.
    14. Timothy Halliday & Daniel Lederman & Raymond Robertson, 2018. "Tracking wage inequality trends with prices and different trade models: evidence from Mexico," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(1), pages 47-73, February.
    15. Gallego, Francisco A., 2012. "Skill Premium in Chile: Studying Skill Upgrading in the South," World Development, Elsevier, vol. 40(3), pages 594-609.
    16. André Varella Mollick & Jorge Ibarra-Salazar, 2013. "Productivity Effects on the Wage Premium of Mexican Maquiladoras," Economic Development Quarterly, , vol. 27(3), pages 208-220, August.
    17. Kien Trung Nguyen, 2014. "The impact of trade and investment liberalization on the wage skill premium: evidence from Vietnam," Departmental Working Papers 2014-20, The Australian National University, Arndt-Corden Department of Economics.
    18. Kris James Mitchener & Se Yan, 2010. "Globalization, Trade & Wages: What Does History tell us about China?," NBER Working Papers 15679, National Bureau of Economic Research, Inc.
    19. Harris, Richard G. & Robertson, Peter E., 2013. "Trade, wages and skill accumulation in the emerging giants," Journal of International Economics, Elsevier, vol. 89(2), pages 407-421.
    20. Atolia, Manoj, 2007. "Trade liberalization and rising wage inequality in Latin America: Reconciliation with HOS theory," Journal of International Economics, Elsevier, vol. 71(2), pages 467-494, April.

    More about this item

    Keywords

    Tariff; Relative prices; Wage inequality;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:46:y:2017:i:c:p:97-109. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.