Globalization and Inter‐Industry Wage Differentials in China

34 Pages Posted: 13 Apr 2018

See all articles by Feicheng Wang

Feicheng Wang

University of Goettingen (Gottingen)

Chris Milner

University of Nottingham - School of Economics

Juliane Scheffel

University of Leeds - Leeds University Business School (LUBS)

Date Written: May 2018

Abstract

This paper explores the relationship between globalization and inter‐industry wage differentials in China by using a two‐stage estimation approach. Taking advantage of a rich household survey dataset, this paper estimates the wage premium for each industry in the first stage conditional on individual worker and firm characteristics. Alternative measures of globalization are considered in the second stage: trade openness and capital openness. A disaggregation of trade into trade in final and intermediate goods shows that increases in import (export) shares of final goods reduce (increase) the wage premia significantly, whereas imports or exports of intermediate goods do not explain differences in industry wage premia. This finding is supported by stronger effects for final goods trade in coastal than noncoastal regions. Our results also show a positive relationship between capital openness and industrial wage premia, though this finding is less robust when potential endogeneity issues are allowed for.

JEL Classification: F16, F66, J10, J31

Suggested Citation

Wang, Feicheng and Milner, Chris and Scheffel, Juliane, Globalization and Inter‐Industry Wage Differentials in China (May 2018). Review of International Economics, Vol. 26, Issue 2, pp. 404-437, 2018. Available at SSRN: https://ssrn.com/abstract=3159640 or http://dx.doi.org/10.1111/roie.12337

Feicheng Wang (Contact Author)

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Chris Milner

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Juliane Scheffel

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

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