Wage Inequality and Input Trade Liberalization: Firm-Level Evidence from China

45 Pages Posted: 22 Sep 2013

See all articles by Chen Bo

Chen Bo

Shanghai University of Finance and Economics - School of International Business Administration

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Zhihao Yu

Carleton University - Department of Economics

Date Written: September 22, 2013

Abstract

This paper investigates how input trade liberalization affects fi…rm-level wage inequality between skilled and unskilled labor. A fall in input tariffs generates increased fi…rm pro…fits, which, in turn, widens wage inequality since skilled labor enjoys a larger proportion of the incremental pro…fits. We analyze this type of channel with an augmented Amiti-Davis (2012) model. Using Chinese fi…rm-level production data, we fi…rst estimate and calculate fi…rm-level wage inequality, which is found to be much greater than that in the U.S. After controlling for possible endogeneity, we …find evidence consistent with our theoretical prediction that input trade liberalization widens within-fi…rm wage inequality.

Keywords: Wage Inequality, Input Trade Liberalization, Firm Evidence

JEL Classification: F10, F12, F14

Suggested Citation

Bo, Chen and Yu, Miaojie and Yu, Zhihao, Wage Inequality and Input Trade Liberalization: Firm-Level Evidence from China (September 22, 2013). Available at SSRN: https://ssrn.com/abstract=2329292 or http://dx.doi.org/10.2139/ssrn.2329292

Chen Bo (Contact Author)

Shanghai University of Finance and Economics - School of International Business Administration ( email )

777 Guo-ding Road
Shanghai, 200433
China

Miaojie Yu

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China
+86-10-6275-3109 (Phone)

HOME PAGE: http://mjyu.ccer.edu.cn

Zhihao Yu

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

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