RMB Real Effective Exchange Rate And Employees' Wages In Import Firms:An Empirical Study Based On Micro Enterprises

Under the framework of the partial equilibrium theory,this paper explores the relationship between the real effective exchange rate of RMB and the changes of the real wages of import enterprises theoretically and empirically.Meanwhile,combined with heterogeneous firm trade theory,the heterogeneity of the typical characteristics of importing enterprises on the effect of exchange rate imposed on wage is further analyzed and the joint impact of fixed import cost and real effective exchange rate on wage changes is explored.The general channels of exchange rate changes affecting wages is expanded creatively-that is,import cost channel,industry import penetration channel and export revenue channel,and with the introduction of the import of final products,a mechanism of joint action through four major channels of real effective exchange rate influence on wages' change is theoretically revealed.Additionally a new perspective for better explaining the paradox of labor demand is put forward.Firstly,literature on the impact of exchange rate changes on employment and wage changes in enterprises is reviewed from both domestic and foreign perspectives.Secondly,based on the micro-matching data of highly detailed product level import tariff database&industrial enterprises database&customs database from 2000 to 2006,the real effective exchange rate of four channels is constructed and calculated at the enterprise level,and some statistics description of stylized facts in REER and wages is made.Thirdly referring to Melitz(2003)theory,the typical characteristics of enterprises is selected and corresponding indicators are constructed to analyze the distribution of real wages of laborers and real effective exchange rate in different characteristics.Next,this paper extends the general channel of exchange rate&wage effect by referring to the model of Campa&GB(2003)and Nucci&Pozzolo(2014),putting forward three hypotheses of exchange rate&wage effect,and theoretically arguing for it.Furthermore combining heterogeneous firm trade theory,the matching data is used to test the combined effects of the real effective exchange rate changes on wage changes of heterogeneous enterprise from industry import penetration,intermediate products import,final products import and export channels.Finally,with reference to the Amiti(2014)model,labor force in the importing department are differentiated as fixed import cost.The new variable of import fixed cost is introduced into the empirical model,which reveals the combined effect of the fixed import cost and the real effective exchange rate on the real wage changes of the workers.The results show that in the long run,every 1%devaluation of the real exchange rate of RMB will lead to a 0.03%decrease in the wage from industry import penetration.The devaluation of the exchange rate will have no significant effect on wage changes through the import of intermediate products,and an increase of 1%devaluation of the exchange rate will result in a wage increase rate of 0.008%from final products import substitution,and a 1%devaluation of the export real exchange rate will result in an increase of 0.17%in the wage of workers.After taking into account the impact of trade liberalization and income differences in the countries of importorigin,the exchange rate wage effect remains sound,but there are significant regional differences in the exchange rate&wage effect.In addition,trade patterns,ownership and productivity have significant heterogeneity effects on the exchange rate&wage effect.Further study finds that the impact of firm fixed import cost on the exchange rate wage&effect depends on whether the imported products of this sector can be replaced by domestic ones.The fixed import cost has a significant role in promoting the wages of laborers in import substitution enterprises and has a significant negative effect on the wages of laborers in complementary manufacturing enterprises.Finally,it makes some basic summary of conclusions and provide several appropriate policy recommendations in terms of how to reduce the exchange rate risk to maximize the profits of the enterprise,how to avoid exchange rate risk transferred by the enterprise to maximize the income of laborers and how the state can implement the related policy to realize Pareto optimal of social welfare.