Research On Patterns And Income Distribution Effects Of International Intra-Product Specialization

With the development and evolution of international division of labor from inter-industry specialization to intra-industry specialization, and to intra-product specialization, more and more countries have to face the rising income inequality, wage gap and the unemployment of unskilled labor. The widening of the income and wage gap among workers of many countries including U.S. and China concurred with the accelerative deepening of intra-product specialization. Since then the research of international intra-product specialization’s impact on income distribution has become a hot and advancing topic in international economics in recent 20 years.In the multilateral international intra-product specialization, different sectors of different countries often undertake different technological intensive components of production process, which leads to different intra-product specialization patterns. But few existing research, especially the empirical research, has been based on different patterns to empirical analysis of the effects of international intra-product specialization. For this reason, the dissertation distinguishes and estimates different patterns of international intra-product specialization as the breakthrough and innovation points, focusing on the effects of various patterns on the income distribution among workers who possess different skill capabilities and educational attainment.The dissertation distinguishes international intra-product specialization between the low-level and high-level patterns. In the low-level pattern, one country or sector undertakes low-tech fragments and imports high-tech intermediate inputs. On the other hand, in the high-level pattern, one country or sector undertakes high-tech fragments and imports low-tech intermediate inputs. In order to estimates the low-level and high-level patterns, the dissertation classifies dynamically all imported intermediate inputs(at the 6-digit level of HS1996) into two categories based on their technology intensities by comparing the TSI (Technological Sophistication Index) of each imported intermediate input with the TSI of the corresponding country per year.This dissertation analyzes theoretically how international intra-product specialization affects the income distribution between skilled labor and unskilled labor. Based on comparative analysis of the existing theoretical model, the dissertation proposes four direct and indirect effects of international intra-product specialization on relative demand and relative wage of workers with different levels of skill capabilities. Direct effects are factor substitution effect and factor demand creation effect, while the indirect effects include product-price change effect and technological improvement induced by international intra-product specialization. Through these four channels, the low-level and high-level patterns of international intra-product specialization have different influence on worker’s relative demand and relative wage within different technological intensive sectors.After distinguishing and measuring the main 45 economies’low-level and high-level pattern of international intra-product specialization from 1998 to 2012, the dissertation finds that 45 economies can be categorized into four groups from the core to the periphery, of which 29 developed economies belong to three different groups, 16 developing countries except India as the peripheral fourth group. China is now still belonging to the fourth groups. However, the gap between low-level and high-level pattern of China’s international intra-product specialization has decreased gradually. According to the Vertical Specialization Share with BEC method, international intra-product specialization pattern of China is characterized by high-tech sectors with low-level pattern. Meanwhile, the low-tech sectors has changed step by step from low-level pattern to high-level pattern of international intra-product specialization. However, there is no evidence of upgrading in the high-tech sectors.The dissertation examines empirically the link between international intra-product specialization and the income distribution respectively with a cross-industry panel data of China and a cross-country panel data of 45 economies. Based on China’s industries’dynamic panel data, the dissertation finds that both low-level pattern and high-level pattern of intra-product specialization increase the wage share of skilled labor. The low-level pattern indirectly affects the income distribution through technology spillovers of skilled-intensive intermediate imports; while the high-level pattern of intra-product specialization directly affects the income distribution through factor substitution. Based on the cross-country panel data, the empirical results indicate that the low-level pattern of intra-product specialization has significantly decreased the wage share of workers with a high level of education, while the high-level pattern has impacted negatively upon the wage share of workers with a low level of education. The net effects of the intra-product specialization tend to shift labor demand towards workers with an intermediate level of education in developing countries. Through technology spillovers of skilled-intensive imported intermediate inputs and imitation innovation, the technological progress induced by low-level pattern is associated with a shift in labor demand towards to workers with an intermediate level of education, while the high-level pattern of intra-product specialization towards to workers with a high level of education due to independent innovation.Based on above results, this dissertation puts forward some policy implications, such as increasing relative supply of skilled labor; adopting regional diversification strategies; supporting high-tech industries in coastal provinces of China to improve their competitive advantages and win higher status in global production sharing; encouraging inland provinces to undertake industries transferred from coastal area and properly protecting low-tech industries deepening low-level pattern of intra-product specialization.