An Empirical Research On The Impact Of Labor Costs On Exports

China’s economy has maintained rapid growth after 30 years of reform and opening up, in which the continued expansion of export trade plays an important role. The surplus labor released by institutional change and low labor costs are always considered an important source of China’s strong export competitiveness. But the continued rise of the minimum wage and the problem of corporate "recruitment difficulties" caused by "labor shortage" phenomenon improve labor wages in China generally. In the background of rising labor costs, exploring the impact of rising labor costs on exports is particularly important for the development of China’s foreign trade. Meanwhile, there is a big difference in institution, economics, culture, customs and many other aspects in different regions of China, there is also heterogeneity in different industry categories on the extent of labor-intensity. These differences that could not be fully quantified might obscure the real effect that the rising labor cost has on exports. Based on this, it is necessary to conduct further exploration on the labor costs’effect on exports of different areas and different industries.Using the data of 28 manufacturing industries in 29 provinces, this paper controls many other variables that may affect the dependent variable, and conducts empirical research on the impact of labor costs on exports. Results show that the rising labor costs have a significant positive impact on export growth on the whole. Thus, while the current labor costs are rising rapidly and reduce the cost advantage of export products directly, the final result of which will still promote export growth. In addition, human capital and natural resources factors exert significant positive impacts on exports, physical capital factor has no significant impact on exports, the interaction term of regional infrastructure and the extent of scale economies of industry has a positive impact on exports, and the proportion of foreign capital exerts a significantly positive impact on export.Results of further grouped regression based on the classification of regional differences show that the significant positive effect of labor costs on exports is mainly in the eastern and the central regions of China, while is not significant in the western regions. The impact of human capital and physical capital factors is significantly positive on the export of eastern regions, the impact of natural resource factor is significant positive on the export of the central regions, and the impact of human capital factor is significantly positive on the export of western regions. The interaction term of regional infrastructure and the extent of scale economies of industry have a significant positive impact on exports in all of the three areas. The proportion of foreign capital exerts significantly positive influence on exports of central and western regions, but was not significant on exports of eastern regions.Results of further grouped regression based on the classification of industry differences show that the effect of labor costs on exports is always significantly positive whether it is in capital or labor-intensive industries and technology-intensive industries. The impacts of human capital and natural resources factors are not significant; the physical capital factor has a significant negative impact on exports in labor-intensive industry and a negative impact on the export in capital-intensive industry, which is significant in the results of the Tobit model. The effect interaction term of regional infrastructure and the extent of scale economies of industry is significantly positive. To labor-intensive industry, the impact of the proportion of foreign capital is positive but not significant, and is significantly positive in capital and technology-intensive industries.In short, the rising labor costs will promote export growth, a higher level of infrastructure in areas and a high degree of economies of scale in the industry have a stronger advantage in exports, and the impact of human capital, physical capital, natural resources and foreign capital factors on exports have regional or sectoral differences. This paper makes the following recommendations based on empirical research results: In current situation of the rising wages, export enterprises should pay attention to their own technology innovation and upgrading, optimize the allocation of resources actively, and hold a rational attitude to the reasonable increase in wages; the government should improve infrastructure situation actively to create favorable external conditions for the region’s exports, and at the same time, encourage industries to turn to scale development actively. In addition, the eastern region should focus on regulation of human capital, physical capital and foreign capital, the central region should focus on regulation of the use of natural resources, and the western region should focus on the regulation of human capital and foreign capital; labor-intensive industry should pay attention that the investment in physical capital must be within limits, capital and technology-intensive industries should consider to put more physical capital in permissible cost, while absorb a greater proportion of foreign capital in the possible condition.This paper is divided into seven parts, the schedule of each part are as follows:The first part is an introduction. Based on the analysis of the background research, we introduced the main contents and methods, innovation and the insufficiency of the article. The second part is the literature review. This section reviews the related theory and literature on the impact of labor costs on exports, clarifies the previous research methods and conclusions, and summarizes their reviews and identifies deficiencies.The third part is the theoretical analysis of the impact of labor costs on exports. Prior to empirical analysis, there must be appropriate theoretical ideas, or the conclusion would be difficult to convince people. This part analyzes the impact of labor costs on exports theoretically, and thus paves the way for the analysis of the empirical part.The fourth part is the analysis of the development of China’s labor costs and exports. This part is the review of history and current development of labor costs and exports.The fifth part is empirical analysis. Using the data of 28 manufacturing industries in 29 provinces of the year 2013, this paper controls many other variables that may affect the dependent variable, and conducts empirical research on the impact of labor costs on exports. The first part is the study design, including the model specification, variable selection and measurement, and data description. The following is the empirical results and analysis section, including the general regression, sub-regional and sub-industry regression.The sixth part is the conclusion and recommendations. This part mainly summarizes the results of the empirical part and put forward specific suggestions according to these results.The seventh part is the conclusion. This part summarizes the content of the article briefly and draws some conclusions and recommendations, which is a thorough summary and generalization of the full text.