The Effect Of Trade Opening On Labor Force: An Empirical Research Based On China's Data

Since the reform and opening-up, trade openness has affected China's economic development in a number of dimensions, which in addition affected China's economic growth, also affected labor force deeply. Obviously, the impact of trade openness on labor force is different in different conditions, trade openness will be harmful to labor for in many aspects when the external conditions are not appropriate. Therefore, in the context of economic globalization, in order to make China get more benefits, we must eliminate these negative effects of trade openness. Based on this,we commit to do empirical research about how trade openness affect China's labor force in the framework of international economics, aimed at discovering in what different conditions trade openness will has different effects on labor force. In this paper, we research the effects of trade openness on three aspects of labor force, which include labor productivity, employment and income distribution.The main content of this paper is divided into seven sections generally. First we briefly describe the paper's background and significance, structural arrangement and innovations in order to indicate the intention of writing this paper. In chapter two we review both domestic and foreign literature about trade openness and productivity rising, economic growth, employment and income distribution, from numerous literature we find that mainstream international trade theory can not explain the labor phenomenon in developing countries, so for the special problems of developing countries, we need to combine the framework of international trade and development economic theory. We give out a brief introduction on the evolution of China's trade openness policy and the development of trade openness since reform and opening-up in chapter three. Based on this,we use the concept of natural opening and policy-oriented opening to break down and measure China's inter-provincial trade openness.In chapter four we study the mechanism of how trade openness influence labor productivity rising, after adding the factor of learning by doing into Ricardian trade model, our model find that if the comparative advantage of a region lies in the sector which has a lower(higher) coefficient of learning by doing, trade openness will decrease(increase) the labor productivity. In order to test whether this mechanism existed in China, we carry empirical study using natural openness and policy-oriented openness measured in previous chapter, and we find only when natural openness was high, policy-oriented openness can benefit labor productivity. Taking into account that human capital was the main determinant of labor productivity rising, in chapter four we also analyze the "first restrain then accelerate" influence mechanism of trade openness on human capital. Chapter five study the influence of trade openness on employment from two perspective, first we extend Harris-Todaro model to the instance of trade openness, and find that if a country's comparative advantage is manufactured goods and there exist labor market rigidity, then the labor transfer induced by trade openness will reduce employment. Taking into account the continuity of employment, we take China's provinces dynamic panel data to verify the theoretical model's predictions, and find when labor market is rigid, trade openness will reduce employment. In this chapter we also use panel co-integration method to analyze how trade openness influence when factor endowment is different, and find that only when the capital-labor ratio was low in one region, trade openness can promote employment. Chapter six analyzes the influence of trade openness on China's income distribution, by adding technological learning into neo-classical trade model we analyzed two approaches of trade openness influenced income distribution: Samuelson-Stolper effect and technological advances effect In addition, in this chapter we also use urban-rural income gap to measure China's income distribution, and using both dynamic panel data and panel co-integration technique to carry empirical research, we find there exist an U-shape influence of trade openness on China's urban-rural income gap. Chapter seven sum up the whole content in this paper and put forward the corresponding policy implications.