A Study On Trade Liberalization,Human Capital Structure And Comparative Advantage

Over the past 40 years of reform and opening up,China has given full play to its comparative advantage of "demographic dividend",successfully participated in the global division of labor,and promoted the development of China’s trade.The process of trade liberalization has accelerated with China’s accession to the WTO,and import tariffs have fallen to a lower level within the prescribed time line as required by China’s accession to the WTO.Since the implementation of China’s reform and opening-up policy,the strategy of differentiated regional development has been adopted,and the differences in economic history and geographical location among regions,which ultimately lead to regional differences in the transmission of tariff economic effects.At the same time,the domestic human capital structure has also undergone tremendous changes with the deepening of reform and opening up.Some scholars pay attentions to the logical causality between the two,but at present most of these studies are focused on exports.The impact of export trade on human capital investment is studied from the perspective of trade openness.Few studies are carried out from the perspective of import,and there are also few studies on human capital structure and comparative advantage.Based on educational investment functions in Findlay and Kierzkowski(1983),combining the heterogeneous trade theory represented by Melitz(2003)with multi-stage continuous production theory in Dixit and Grossman(1982),which is including heterogeneous worker skills,individual education investment decision-making and global division of labor,this paper first examines the impact of trade liberalization on individual education investment through mathematical and physical modeling.On this basis,the theoretical hypothesis and inferences to be tested are put forward.Furthermore,combined with the theory of global division of labor,we further examine the impact of trade liberalization and human capital structure on comparative advantage,thus enriching and expanding the perspective of heterogeneous trade theory.The main conclusions of this paper are mainly composed of the following three aspects:Firstly,under the symmetrical model of two countries,trade liberalization enhances the expected return of individual investment in education by increasing the skill premium of domestic skilled workers,lowers the threshold of individual ability to invest in education,and ultimately encourages individuals to increase their investment in education.Empirical research using CHIPs micro-survey data,product tariff data provided by WITS database and industry employment data provided by China’s industrial enterprise database shows that trade liberalization has significantly improved the education years of individual workers,and there are regional,industry and gender differences.After using two-stage instrumental variables to solve the endogenous problem,as well as the results of a variety of robustness tests,trade liberalization will increase individual’s education investment.Further use of intermediary effect model to deconstruct the impact mechanism,we find that trade liberalization firstly increases the individuals’ expected return of education investment by increasing the wage premium of skilled workers within industry,and encourage individuals to invest in education.Secondly,trade liberalization increases the demand for skilled workers and reduces the ability threshold of education investment,and encourages individuals to continue school education.Secondly,trade liberalization promotes the evolution of human capital structure from primary to senior level by encouraging individuals to invest in education and increasing the educational years of individual workers,and ultimately promotes the upgrading of human capital structure.After using the double difference method to overcome the potential endogeneity,we find that after China’s accession to WTO,more cities have reduced tariffs,that is,those with greater degree of trade liberalization change.Tariff reduction will increase the proportion of university-educated population in urban labor force,and the deepening of trade liberalization will promote the "advanced" structure of human capital.The regression results of further decomposition of workers’ educational structure show that the tariff reduction in more cities reduces the proportion of workers with high school education and higher education,and promotes the upgrading of human capital structure.The results of the expansion analysis of trade liberalization on the distribution of human capital structure show that the greater the change of trade liberalization,or the greater the extent of trade liberalization deepening,the smaller the Gini coefficient of urban education,and the more equal the distribution of human capital structure in urban areas.Thirdly,with the decrease of trade cost and the deepening of trade liberalization,enterprises’ participation in the production stage of global division of labor moves upstream,and the intensity of skills required for production increases.As the intensity of skills is expressed by the proportion of the working population with different educational levels in the total workforce,the source of comparative advantage represented in the production stage gradually changes to that of higher education-educated workers.Using the world input-output table provided by WIOD database and the employment skill data provided by SEA database of WIOD database at the industry level in China,the empirical analysis shows that the increase of higher education proportion of workers in low-tariff industries(industries with relatively high degree of trade liberalization)has a positive impact on industry comparative advantage than that in high-tariff industries(industries with relatively low degree of trade liberalization).Considering the matching of skill intensity and skill demand of workers,the industry is classified and analyzed.It is found that in knowledge-intensive and capital-intensive industries,the increase in the proportion of workers receiving higher education will significantly enhance the dominant comparative advantage of the industry,while the increase in the proportion of workers receiving primary education will significantly enhance the dominant comparative advantage of labor-intensive industries.After using instrumental variables to solve the endogenous problem and multiple robustness tests,the regression results are still robust.Based on the above main conclusions,the main policy recommendations we get include three parts: First,we should continue to deepen the reform of trade liberalization and enhance the endogenous driving force of sustainable trade development.Some studies have pointed out that the advanced nature of industrial structure is based on the advanced nature of production factors(Zhang Youwen,2015).Seeking the endogenous power of foreign trade development can not be separated from the support of human capital.The empirical results of this paper prove that the process of trade liberalization in China can improve the education years of individual workers and positively affect individual investment decision-making in education by improving the skill premium of skilled workers in the industry and increasing skilled jobs.Therefore,human capital is indispensable to build a reasonable industrial structure to support foreign trade reform and provide the endogenous driving force for sustainable trade development.The Nineteenth National Congress of the CPC also pointed out that we should firmly implement the strategy of strengthening the country by talents,and further put forward the scientific conclusion of "building a large army of knowledge-based,skill-based and innovative workers".Therefore,we should continue to deepen the reform of trade liberalization,promote the process of trade liberalization in an orderly manner,improve the education years of individual workers,and ultimately provide the endogenous driving force for the sustainable development of trade.Second,trade liberalization policy and industrial policy should be coordinated to promote the upgrading of human capital structure.The empirical analysis in Chapter 5 of this paper shows that the proportion of university-educated and above-educated workers increases more in regions with greater changes in trade liberalization,and at the same time,it reduces the proportion of urban workers below high school level,which is conducive to the realization of advanced human capital structure.At the same time,trade liberalization also reduces the Gini coefficient of cities and reduces the human resources within cities.The degree of inequality in the distribution of capital structure.The comparative advantage of China’s "demographic dividend" has actively promoted the development of China’s economy and trade in the early stage of reform,but at present,this comparative advantage of "demographic dividend" is gradually losing with the aging of the domestic population and the industrial development of the surrounding countries.The realization of "talent dividend" is an important measure to change this situation.According to the results of empirical analysis,coordinating trade liberalization policy and industrial policy,increasing the expected return of individual workers for educational investment,and reducing the opportunity cost of educational investment will promote the upgrading of human capital structure and realize the transformation from "demographic dividend" to "talent dividend".Third,we should improve the structure of human capital and match the needs of talents to cultivate new competitive advantages in foreign trade.The document of the CPC Central Committee has repeatedly emphasized the need to cultivate new competitive advantages in foreign trade.The Nineteenth National Congress of the CPC has reiterated this conclusion,sufficiently demonstrating that it is urgent to seek new sources of comparative advantages in foreign trade development at a time when China’s foreign trade development is facing complex internal and external environmental changes.The empirical analysis of Chapter 6 shows that,on average,the increase in the proportion of Higher Education Labor in the industry significantly improves the dominant comparative advantage of the industry,and the positive impact of the increase in the proportion of Higher Education Labor in low-tariff industries on the dominant comparative advantage of the industry is greater than that in high-tariff industries;while in the knowledge-intensive and capital-intensive industries with greater demand for skilled workers,higher education The positive influence of Education Labor on the dominant comparative advantage of the industry is greater.This result means that improving the structure of human capital and improving the matching degree between human capital at different levels and the needs of industry skills can better promote the industry’s comparative advantages and provide talent support for the construction of new competitive advantages in foreign trade development.The structure of this paper is as follows: besides the introduction and conclusion,there are six chapters.The introduction briefly introduces the research background and significance,research ideas and contents,main research methods,innovation and shortcomings.The first chapter is a literature review on trade liberalization,human capital investment,human capital structure and comparative advantage.Chapter 2 is the theoretical basis of this paper.Based on the educational investment function and the heterogeneous trade model of enterprises,as well as the continuous production model of the global division of labor,we analyze the mechanism channels of the decline of trade costs,or the impact of the process of trade liberalization on individual education investment decision-making,and get the theoretical hypothesis 1 and 2.According to the theoretical hypothesis 1,we can further get the theoretical inference 1.To the relationship between trade cost reduction and human capital structure;to further embedding continuous production in the framework of heterogeneous trade theory,we get the theoretical hypothesis 3 in equilibrium analysis,that is,the impact of trade cost reduction and human capital structure on comparative advantage.The third chapter is about the characteristics and facts of China’s trade liberalization,education and human capital structure.This part first briefly introduces the adjustment of tariff policy and its main function changes since China’s reform and opening up.Secondly,it makes a preliminary statistical description and analysis of China’s trade liberalization,education investment and human capital structure from the data,and explores the logical relationship between China’s trade liberalization,human capital investment and human capital structure by using the graph relationship.Chapter Ⅳ analyses the impact of trade liberalization on individual human capital investment and its mechanism.On the basis of the theoretical model constructed in the second chapter,the first and second theoretical hypotheses are tested.Using CHIPs micro-survey data provided by China Income Distribution Research Institute of Beijing Normal University,customs data provided by WITS database and merged data of China’s industrial enterprises,this paper analyses how the deepening of trade liberalization affects the educational investment of individual workers,and from the perspective of different samples.Furthermore,the intermediary effect model is used to analyze the mechanism channels of trade liberalization affecting individual workers’ investment in education.The fifth chapter analyses the impact of trade liberalization on human capital structure and its distribution.This chapter examines the theoretical deduction 1 of Chapter II’s theoretical analysis.Firstly,the double-difference econometric model is used to solve the potential endogenous problems.Then,the logical relationship between trade liberalization and human capital structure is studied from the overall and sub-sample levels,and the impact of trade liberalization on the distribution of human capital structure is expanded and analyzed.Chapter 6 analyses the impact of trade liberalization and human capital structure on comparative advantage.This chapter will test the third theoretical hypothesis of Chapter II’s theoretical analysis.Using the information of employment,output and workers’ skills at the industry level provided by the World Input-Output Bian and its sub-database SEA in WIOD database,this paper investigates the impact of trade liberalization and human capital structure on industry comparative advantage.