Globalisation and labour market in China

Feicheng, Wang (2017) Globalisation and labour market in China. PhD thesis, University of Nottingham.

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This thesis empirically investigates the relationship between globalisation and labour market outcomes by exploring Chinese data. It is motivated by the fact that China has experienced a rapid pace of globalisation in the past two decades and has witnessed increasing wage inequality at the same time. It is a collection of three self-contained studies that examine the effects of various aspects of globalisation on employment or wage inequality.

Chapter 1 presents research background and general motivations, followed by a simple description of the outline and the structure of the thesis.

Chapter 2 explores the relationship between globalisation and inter-industry wage differentials in China by using a two-stage estimation approach. Taking advantage of a household survey dataset, this study estimates the wage premium for each industry in the first stage conditional on individual worker and job-related characteristics. Alternative measures of globalisation are considered in the second stage; trade openness and capital openness. The regressions do not reveal a significant relationship between overall trade (import and/or export) openness and wage premia. However, disaggregation of trade into trade in intermediate and final goods is shown to matter. Increases in import (export) shares of final goods tend to reduce (increase) the wage premium significantly, whereas imports or exports of intermediate goods do not explain differences in industry wage premia. This finding is supported by stronger effects for final goods trade in coastal than non-coastal regions. Our results also show a positive relationship between capital openness and industrial wage premium, though this relationship is less robust when endogeneity issues are allowed for.

While Chapter 2 focuses on wage differentials across industries, Chapter 3 turns to wage inequality within industries. Specifically, this chapter examines the relationship between average income of exporting destinations and skill premium using Chinese manufacturing industry-level data from 1995 to 2008. To do so, we construct weighted average GDP per capita across destinations employing within-industry export share to each industry as weights, and then link it with industry-level skill premium. Empirical evidence shows a positive correlation between average destination income and average wages, which is consistent with existing literature. More importantly, we find that industries that export more to high-income destinations tend to pay a higher skill premium, suggesting that skilled workers benefit more from high-income exports than unskilled workers on average. IV estimates confirm causality and this positive relationship identified is robust to the inclusion of additional control variables. However, the positive relationship only applies to ordinary export whereas processing export tends to induce a reduction in skill premium. Our results also reveal a stronger effect during the post-WTO accession period when China integrated into the world economy rapidly. The findings in this study provide evidence in support of the relationship between export destinations and within-industry wage inequality.

Chapter 4 incorporates labour market conditions and investigates whether the nature of firm-level employment adjustment is affected by the flexibility of the labour market. We take advantage of the differences in local labour market conditions created by the non-uniform implementation of the hukou reform in China. Then we identify the employment effects of the reform by comparing firms in reform regions to those in non-reform regions. Combining firm-level and city-level data, we adopt a difference-in-difference approach. Empirical results find that firms exposed to the hukou reform have higher employment on average than similar firms without the reform, which indicates that a more flexible labour market allows for an easier employment adjustment. We then extend our empirical framework to explore the conditioning effects of the hukou reform on employment adjustment following trade openness. Consistent with our expectations, firms respond to trade shocks by increasing employment relatively more with the presence of the hukou reform. These findings offer important implications to the current labour market reform in China and to other developing countries with inter-region labour movement barriers like India and Vietnam.

Finally, Chapter 5 summarises main findings of the thesis and briefly discusses potential directions for future research.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Chris, Milner
Juliane, Scheffel
Keywords: Labor market, Globalisation
Subjects: H Social sciences > HD Industries. Land use. Labor
Faculties/Schools: UNNC Ningbo, China Campus > Faculty of Humanities and Social Sciences > School of Economics
Item ID: 41382
Depositing User: WANG, Feicheng
Date Deposited: 22 Sep 2017 02:19
Last Modified: 13 Oct 2017 01:23

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