China''s Growth and Relative Wages in East Asian Economies

• Main Authors: Yi-Chang Huang, 黃奕強
• Other Authors: Shih-Hsun Hsu
• Format: Others
• Language: en_US
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/70868666780414216667

碩士 === 國立臺灣大學 === 農業經濟學研究所 === 93 === Changes in the labor markets of the developed countries since 1970s have been the subject of extensive empirical analysis. Moreover, Wood (1997) investigated relationship between openness and wage inequality in developing countries, especially the Latin American countries, and argued that one major reason responsible for deterioration in wage inequality in the Latin American countries since openness is China’s strong growth in labor-intensive goods in world market share. However, Lardy (2003) points out that the benefit from openness of China’s huge domestic market should not be ignored and the impacts of China’s growth and openness might be exaggerated. In this thesis the opening and rapid expansion of China is examined for its effects on East Asian economies. Since 1979, China has changed her trade policy regime in favor of “outward orientation”. This “opening up” has been associated with substantial growth in exports and with a shift in the composition of those exports away from products intensive in natural resources toward labor intensive manufactures. Our concern is to explore the effects of these developments on wage inequality within the East Asian countries. For our empirical assessment we use the database (Version 6.0) and model formulation of the GTAP (Global Trade Analysis Project) multi-sector multi-region applied general equilibrium model where labor is disaggregated by skill level. Simulation results shows a tendency toward increasing skilled-labor-unskilled-labor wage ratios in all countries except Japan and the trend is enhanced by the combination of openness and growth in China. The rising relative wages between skilled and unskilled workers (0.08%) in Taiwan seems to be consistent with the stylized fact of the increase in the relative wage after 1995. Hong Kong and South Korea show similar pattern with 0.44% and 0.04% increase in the relative wages between skilled and unskilled workers. However, the impacts are not so significant. The results lend support to the argument by Lardy (2003) that the effects might be diluted by the benefits from openness of China’s huge domestic market.