Employment And Wage Effects Of Trade Liberalization Studies

Trade liberalization is a reallocation process of product and profit. Foreign trade influences the factor market through the amount and price of the goods of import and export. During the period of trade liberalization, the value and structure of the foreign trade in China has been improved greatly, which has played a vital important effect on the employment and wage ratio of workers in the manufacture sector.According to the Stolper-Samuelson theorem, free trade will improve the relative revenue of abundant factor. As a labor-abundant, especially unskilled-labor-abundant country, foreign trade will increase the relative wage of workers, especially unskilled workers in our country. Nevertheless, the fact of our economy does not fit the hypothesis of S-S theorem, so the influence of foreign trade has been altered. The growth of manufacture trade promoted the employment obviously, while did little to the improvement of wage ratio due to the huge unemployment and quick-increase labor supply.When regarded as a whole, the total welfare of labor force is decided by both the relative wage ratio and employment. Thus, the percent of total wage of Gross Domestic Product (called the percent of labor revenue) can reflect the welfare change of workers more accurately.In order to discern the influence of trade liberalization on the welfare of total and different skilled workers in manufacture sector, I focus on the percent of labor revenue and spread it in tow level. First, I analyze the relationship between the percent of labor revenue of total workers in manufacture and the trade liberalization, using the time-series data form 1980-2005; Second, I do the same analysis using the panel data of 22 branch industry of manufacture sector during 2001-2006.Considering the producers will adjust the inputs according their prices, I construct an empirical formula based on the long-cost function. Take the percent of labor revenue as the dependent variable, while the trade amount, the price of factor and some structure variable as explanation variable.The result of empirical study shows that the expanding of import and export of manufacture played a positive influence on the increase of the percent of labor revenue. Among which, the influence of export was more obviously. Further more, the positive influence of trade expressed mainly through the expanding of employment. The study on the different skilled workers obtained the same result: The expansion of trade of different-technology product played positive influence on the percent of labor revenue of different skilled workers and it's more obviously in the low technical industry (unskilled labor intensive industry).