The Effect Of International Trade On China's Wage Gap

From the seventies and eighties of the last century, as the acceleration of world trade liberalization, international trade including the North-South trade, North-North trade, inter-industry trade, intra-industry trade and other international trade forms has developed rapidly. At the same time of the trade linearization, the wage gap expansion in all kinds of countries is intensified. So the relationship between international trade and wage gap is becoming the hot field of the international economics theory and empirical analysis.A large number of scholars have systematically studied the relationship between international trade and wage gap from both theory and practice and get the different stages of the theory. Classical trade theory, Neo-classical trade theory, New Trade Theory and the New-new trade theory respectively explains how the inter-industry trade, the intra-industry trade and the intra-product trade affect the wage gap.Although the effect of different forms of international trade on the wage gap is different, their mechanism is similar. International trade affects the domestic wage gap respectively through commodity prices, technological progress, the individual behavior as well as other means, such as labor elasticity of demand, non-formal sector, education and the government income redistribution etc.This paper gives some empirical conclusions about how China's international trade affects its wage gap on the basis of analysis of theories, which are as follows:From the perspective of industry wage gap, it shows a close correlation between foreign trade and real wages in China's industries. China's inter-industry wage differentials show the trend of gradual expansion with the adjustment of trade structure.The empirical research has found that the inter-industry trade and intra-industry trade play a different role in the wage gap. The impacts of China's international trade on the inter-pattern wage gap (the wage gap between inter-industry trade industries and intra-industry trade industries) are as flows. Firstly, the effect of general trade on inter-pattern wage gap is uncertain.Secondly, the effect of export on the inter-pattern wage gap is positive. Last, the effect of import on the inter-pattern wage gap is negative. The impacts of China's international trade on the intra-pattern wage gap (the wage gap within inter-industry trade industries or intra-industry trade industries itself) are as flows. In the form of inter-industry trade, general trade and imports tend to widen the wage gap, while exports tend to narrow the wage gap. In the form of intra-industry trade, general trade, imports and exports all tend to expand the wage gap. So it is obvious that international trade play an important role in expanding China's industry wage gap.From a regional perspective, China's international trade of regions is more closely associated with their real wages. However, with the speed of openness in the Midwest region accelerating, the wage gap between three regions has also shown the trend of convergence. Empirical studies show that the relationship between China's international trade and China's regional wage gap, including inter-provincial wage gap and inter-regional wage gap, is negative. It means that trade liberalization and regional openness help narrowing the regional wage gap.The empirical research of this paper has found that international trade expands the wage gap between industries in China, while it helps narrow the wage gap between different regions of China. Therefore, correctly understanding and dealing with the relationship between international trade and the wage gap in China is serious. The measures are, On the one hand, actively adjusting the product structure, the industry structure and regional structure of China's international trade, improving the elasticity of demand for exports, shifting the consumption from foreign market to domestic market, and mitigating the negative effect of international trade on the domestic productivity and employment. At the same time, we should speed up the inter-regional transfer of the industries from the eastern region to the central and western regions. The eastern regions primarily undertake the international trade in services from the developed countries and expand the demand of high-skilled labor. The central and western regions mainly undertake the manufacturing industry from the east regions, and even the foreign countries and improve the employment and welfare of low-skilled workers. The other measures are actively using economic and non-economic means to expand employment opportunities and improve income distribution. The first to do is straightening out the price of labor and increasing the proportion of the labor's remuneration in the initial distribution of factors. The second to do is emphasizing the industry equity, regional equity and equity among micro-subjects in the redistribution process. In a word, trade reform and income distribution adjustment are the same important to effectively reduce the negative impact of international trade on the wage gap.