Research On The Impact Of Trade Liberalization On Firms’ Employment

With the implementation of "Bringing In" strategy and "Going Out" strategy,it has been confirmed that Opening Up will bring progress.Benefiting from the broad-based opening up and integration with the world,China has become the second largest economy in the word,and contributed more than 30% to world economic growth for many years.Trade openness,as an important part of the export-oriented economy,has also made significant progress.At present,China is the largest trading country in the world.Influenced by trade flows,market boundaries have been widened,and resources have been re-allocated around the world.Labor that is one of the important input factors will be affected undoubtedly.And the effect has received widespread attention considering the large scale of Chinese labor market and the increasing level of marketization.Therefore,it is of great practical significance to explore how trade opening affects labor market.In this study,we attempt to study the impact of trade liberalization on the firms’ employment based on the background mentioned above.The reason why we choose firms as research objects is that firms are the main parts of labor market and they have the ability to re-allocate resources independently when affected by external shock.Therefore,the employment structure of firms can directly reflect the demand of the labor market.First,this article attempts to analyze how trade liberalization affects the optimal production decision-making and labor resource allocation of firms,as well as its micro-influence mechanism.Then,on the basis of firm heterogeneity,we further consider the heterogeneity of employees and classify employees according to gender and skills diversity.From a gender perspective,we analyze the impact of trade liberalization on the gender employment prejudice.And from a skill perspective,we analyze the impact on the employment skill structure.Through the analysis of the above-mentioned questions,we attempt to provide suggestions and advice for the harmonious development of trade openness and the labor market.The main conclusions of this article are as follows:Firstly,we construct the indicator measuring allocation efficiency of labor resource at the firm level,and the result shows that tariff reduction has promoted the efficiency of labor resource allocation.Compared with the impact of the trade liberalization of final goods,the trade liberalization of intermediate goods plays a more important role.Among all kinds of firms,the impact on the foreign-funded firms,low-tech firms and firms in the eastern region is more significant.We further find that due to the existence of adjustment costs,the impact of the trade liberalization of intermediate goods on state-owned firms has a time lag effect.Mechanism analysis verify the existence of a cost-saving mechanism,which means the intermediate trade liberalization promotes the optimal allocation of labor resources by reducing the unit input cost of intermediate goods.Secondly,this article also explores the impact of trade liberalization on the firms’ employment skill structure.Through the empirical study,we find that the trade liberalization of intermediate goods has reduced the employment skill structure while the trade liberalization of final products has improved the employment skill structure of firms.Because the influence of the trade liberalization of intermediate goods dominates,trade liberalization has reduced firms’ employment skill structure.Furthermore,we find that trade liberalization has expanded the employment scale of both skilled and unskilled workers in firms,but the disproportionate increase in unskilled workers has led to a decline in the proportion of skilled employment.This may be due to the imported intermediate products more skill-intensive,which substituted the demand for some skilled workers,and at the same time increased the demand for unskilled workers in production.It is verified indirectly from the proportion of permanent workers which is reducing in the firm’s recruitment.Thirdly,we find that trade liberalization has increased gender employment prejudice at the firm level and aggravated gender inequality in the labor market.However,the changes in gender employment prejudice are different among employees with different levels of education.For workers with junior high school education and below,the firms’ gender employment bias is reduced;while for workers with high school education and above,which is heightened.In further analysis,we find that because of the employment adjustment costs,the impact of trade liberalization on heterogeneous firms is different.Using the per capita payment of "three insurances and one housing fund" as a proxy variable,we find that the gender employment prejudice of firms with lower adjustment costs is increasing while the gender employment bias of firms with higher adjustment costs is decreasing.To sum up,at the firm level,trade liberalization has improved the efficiency of labor resource allocation,but at the same time it has exacerbated gender employment prejudice and reduced the skill structure of firm employment.It shows that there is still room for further adjustments of firms’ employment structure on the background of trade liberalization.On the one hand,it is worth thinking about how to strengthen the protection of female workers and promote gender equality in the labor market.On the other hand,in order to improve the position in global value chain,it is also necessary for firms to attract more highskilled workers to prepare for the high-quality development.