Competing with the Dragon: Employment and Wage Effects of Chinese Trade Competition in 17 Sectors Across 18 OECD Countries

LIS Working Paper Series No. 623

26 Pages Posted: 28 Nov 2014

See all articles by Stefan Thewissen

Stefan Thewissen

Leiden University - Department of Economics, Students

Olaf van Vliet

Leiden University - Leiden Law School; Leiden University - Department of Economics

Date Written: November 1, 2014

Abstract

The rapid rise of China on the global economic stage could have substantial and unequal employment and wage effects in advanced industrialised democracies given China’s large volume of low-wage labour. Thus far, these effects have not been analysed in the comparative political economy literature. Building on new pooled time-series data, we analyse the effects of Chinese trade competition across 17 sectors in 18 countries between 1990 and 2007. Our empirical findings reveal overall employment declines and higher earnings inequality in sectors more exposed to Chinese imports. We devote particular attention to a new channel, increased competition from China in 59 foreign export markets, which positively affects the high-skilled whilst the low-skilled bear the brunt. Hence, this study shows that neglecting the competition in foreign countries leads to underestimation of the distributive effects of trade. More generally, our findings provide new insights into how international trade, technological change, and labour market institutions contribute to the widely observed trend of rising inequality.

Keywords: globalisation, export competition, wage inequality, labour markets, sectors

JEL Classification: E24; F14; J30; O33

Suggested Citation

Thewissen, Stefan and van Vliet, Olaf, Competing with the Dragon: Employment and Wage Effects of Chinese Trade Competition in 17 Sectors Across 18 OECD Countries (November 1, 2014). LIS Working Paper Series No. 623. Available at SSRN: https://ssrn.com/abstract=2531299 or http://dx.doi.org/10.2139/ssrn.2531299

Stefan Thewissen

Leiden University - Department of Economics, Students ( email )

Netherlands

Olaf Van Vliet (Contact Author)

Leiden University - Leiden Law School ( email )

Steenschuur 25 PO Box 9520
Leiden, 2300 RA
Netherlands

HOME PAGE: http://www.law.leiden.edu/organisation/taxlawandeconomics/economics/staff/vliet.html

Leiden University - Department of Economics ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands

HOME PAGE: http://www.law.leiden.edu/organisation/taxlawandeconomics/economics/staff/vliet.html

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