The Impact Of Trade Liberalization On The Wage Level Of The Chinese Industrial Enterprises

With the development of the world economy, as one of the most important vector of Economic Globalization, international trade has surpassed its traditional function of pushing the goods flow between nations by showing the ability to facilitate the flow of factors of production and change the internal factor market equilibrium of the participating nations. Meanwhile, the Reform and Opening Up policy has helped China to gain a robust economic growth, and the trade liberalization has brought the nation with a much stronger interaction with the rest of the world. Under such a circumstance, China's labor market is being influenced by a tremendous power coming from the international market, and with the deepening of the trade liberalization, such influence has gone beyond the efficiency territory and penetrated into the distribution area of the factor compensation, which in turn plays an import role in adjusting the condition of social equality.The purpose of this research is to make clear the influence of trade and trade liberalization on the distribution of factor compensation, especially the distribution of labor remuneration in China. We make great effort to identify different channels through which the trade liberalization would impose its impact, which would help us to provide references and insights for the authorities to set up more appropriate policies for the industrial restructuring and economic transition.We initiate the research by reviewing and analyzing the relevant literatures about the how international trade affects the factor market and summarize the trade's influence on the distribution of labor remuneration in developing countries. Combining the insights from the literature and China's specific condition, we raise several possible channels through which the trade liberalization would affect the worker's wage level in China's enterprises, including the price effect, the productivity effect, the technology effect, the institution effect and the exporting choice effect. Based on these theoretical analyses, we analyze the micro panel data generated from the survey conducted by the National Bureau of Statistics of China on all the SOEs and all the non-state-owned enterprises with 5 million annual sales in the industrial sector during the year 1998-2007. We investigate the influence of trade liberalization on the wage level in China's industrial enterprises and check the relevant theories and hypothesis. In order to split the influence of different mechanisms, we construct a research framework which increases in depth gradually and pick up the appropriate econometrical method to tread the panel data. Finally, we come to the following conclusions:1) The exporting behavior of the enterprise has a significant influence on worker's wage level. At a relatively low export participation level, the worker's wage level would go down as the export dependency ratio increases; but when the export participation level rises to a certain point, the worker's wage level would begin to increase as the export dependency ratio increases. A U-Curve relationship is found between wage level and export dependency ratio at the enterprise level.2) The trade liberalization has a significant positive effect on the wage level and this effect is relatively lower in enterprises where more capital is provided by investors from foreign countries and Hong Kong, Macao and Taiwan. The effect is also weaker in enterprises with higher capital intensity or larger scale. These phenomena are generally consistent with the H-O Theorem and our hypothesis.3) Trade liberalization and productivity both have a significant positive influence on the wage level, but the wage-raising effect of trade liberalization is weaker in enterprises with higher productivity. This phenomenon is accord with our hypothesis about the distort-correcting function of the trade liberalization.Our research finds that trade and trade liberalization play an active role in raising the worker's wage level through complex mechanisms. By pushing forward the trade liberalization while enhancing the institutions protecting the workers' rights and improving the technological standards of the labor intensive industries, we could correct the distortion in labor remuneration, improving the social equality and accomplish the harmonious development of the society.