Impact Analysis On The Wage Co-movements Between China And Its Major Trade Partners

With the accelerated development of global economic integration,trade relationship is getting closer among countries,and the co-movement between economic variables is not limited within one country.Co-movements amongst economic variables often happen between countries in the opening economic system.Even if the same economic variables,co-movement effects among countries are existing.In recent years,the international wage co-movement effects have attracted the attention of researchers.Due to the existence of the co-movement effect,a monetary shock from any trade partner is likely to have an impact on China's economy through the wage co-movement.Recently,more and more researchers focus on the studies of labor wage linkage effects.The literature review can be found from the micro level such as the study about the wage sharing mechanism of multinational companies(Budd et al,2005),which is trying to illustrate the wage co-movement from the diversification of risk between parent firm and subsidiaries;and from the macro level such as the empirical study of the influence of exchange rate system difference on the wage co-movement effects(Kurokawa et al,2016).However,although there is a relatively mature theory and theoretical model about wage co-movement,the empirical evidence is scarce,and the samples selected by researchers are limited,most of them are developed countries.Also the existing wage co-movement theoretical model is not suitable for the countries with complex exchange rate regime,so that this article tries to improve the existing model and make it suitable for the developing countries that have a complex exchange rate regime.The improved wage co-movement model get rid of exchange rate variable and is suitable for the complex exchange rate regime developing country such as China.By analyzing the fact of economic development and trade cooperation among the samples,three intermediaries are regarded as the bridges in the wage co-movement between two countries:i)price of trade goods;ii)foreign direct investment;iii)migration of human capital.This paper makes three contributions on the wage co-movement theory:i)improve the model by substituting the exchange rate variable with consumption and price variables;ii)build a new data set of wage co-movement including the developing country China and its major trade partners,with the variables of wage,bilateral trade,GDP,house consumption level.CPI,labor productivity and so on;iii)take empirical study about the wage co-movement among China and its major trade partners through the improved model,and the result shows that Hongkong and Korea have the significant wage co-movement effects with China.The paper suggests that the factors affect the significance might include:i)degree of tightness in trade cooperation;ii)degree of opening in migration:iii)difference of economic power compared with trade partner.According to the analysis and the empirical results,this paper finally puts forward three relevant policy suggestions:i)China should realize that China still exists a gap against with developed countries;ii)China can mobilize trade partners resources for better macroeconomic controlling and regulation since there is a wage co-movement effect between the trade partners;iii)China needs to strengthen the trade cooperation with all countries in the world,and expand the economic and trade influence,and pay attention on the flow-in and flow-out labor.