Trade, Technology, and China's Rising Skill Demand

26 Pages Posted: 23 Dec 2007  

Bin Xu

China Europe International Business School

Wei Li

University of Virginia - Darden School of Business; Centre for Economic Policy Research (CEPR)

Abstract

China has experienced rising wage inequality due to rising relative demand for skilled labor. In this paper, we use a sample of 1,500 firms to investigate the impact of trade and technology on China's rising skill demand. We find that export expansion had a negative direct effect (Heckscher-Ohlin type) and a positive indirect effect (export-induced skill-biased technical change) on skill demand; the net effect was found positive and accounted for 5 percent of rising skill demand of the sample firms. We find that technical change in Chinese firms was on average skill-neutral, but majority foreign-owned firms experienced skill-biased technical progress that accounted for 22 percent of the rising skill demand of the sample firms.

Suggested Citation

Xu, Bin and Li, Wei, Trade, Technology, and China's Rising Skill Demand. Economics of Transition, Vol. 16, Issue 1, pp. 59-84, January 2008. Available at SSRN: https://ssrn.com/abstract=1077999 or http://dx.doi.org/10.1111/j.1468-0351.2007.00314.x

Bin Xu (Contact Author)

China Europe International Business School ( email )

699 Hongfeng Road
Shanghai 201206
China

Wei Li

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
804-243-7691 (Phone)
804-243-7681 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/li.htm

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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