The Research On The Impact Of Foreign Direct Investment Liberalization On China’s Labor Mobility

Since the first edition of The Catalogue for the Guidance of Foreign Investment Industries was published in 1995,the institution-based opening of foreign direct investment has been an important content of China’s opening to the world.In the process of comprehensively deepening reform and opening-up,China has moved from opening up in some sectors to a new stage of opening up in a wide range of sectors.As a very basic and key factor in the development of national economy under the condition of open economy,the impotance of labor mobility is self-evident.There is no doubt that the entry of foreign direct investment has a deep influence on the adjustment of industrial structure and regional economic agglomeration,but also directly or indirectly on China’s labor market.However,the study of labor mobility in China from the perspective of FDI is still a field to be explored.As socialism with Chinese characteristics has entered a new era,the 19 th National Congress of the Communist Party of China(CPC)stressed the need to remove institutional obstacles that impede the social mobility of labor and talent.Therefore,on the basis of reasonable measures of China’s foreign direct investment liberalization level and the labor mobility degree in this paper,I try to use scientific analysis methods and individual micro data to deeply explore the influence of the liberalization of foreign direct investment in China on labor mobility in regions,industries and occupations,and further discuss the mechanisms and individual level welfare.Based on this,constructive suggestions are put forward.According to the research topic,this paper mainly deeply analyzes the following questions:First,how to measure the liberalization level of foreign direct investment in China scientifically and reasonably? Based on the FDI policy of China,this paper constructs the FDI liberalization policy variables from industry and city dimensions.On one hand,using China’s administrative firm registration data and census data,and taking the Catalogue for The Guidance of Foreign Investment Industries as an instrumental variable,the index of FDI liberalization in city dimension is constructed.On the other hand,based on the Catalogue for The Guidance of Foreign Investment Industries,combined with the Chinese Industry Classification,the index of FDI liberalization is scored in the 4-digit industry dimension according to different categories of the Guidance.Second,how to measure the degree of labor mobility in China systematically and comprehensively? Based on the research progress of existing literature,this paper will construct a comprehensive indicator system of labor mobility from the dimensions of region,industry and occupation.On one hand,based on the China Migrants Dynamic Survey(CMDS)from 2010 to 2017,regional indicators of labor mobility are constructed,including inter-provincial labor mobility indicator and inter-city within-province indicator.On the other hand,the industrial labor mobility index and occupational labor mobility index are constructed by using the data of China Family Panle Studies(CFPS)from 2010 to 2016.Third,will China’s liberalization of foreign direct investment affect labor mobility? In view of this problem,this paper carries out a systematic empirical analysis from three chapters,including: study on the impact of FDI liberalization on regional level labor mobility,study on the impact of FDI liberalization on industry level labor mobility,and study on the impact of FDI liberalization on occupation level labor mobility.In this paper,a large number of robustness tests are used to verify the reliability of the baseline empirical results.In the empirical method,using fixed effect model,probit model,instrumental variable and other methods for empirical analysis,and effectively solve the endogeneity problem.Fourth,what are the mechanisms by which foreign direct investment liberalization affects labor mobility in China? This paper sorted out three potential mechanisms by combing the existing literature.Firstly,the mechanism of FDI direct and spillover effects are empirically examed from the prespective of the ownership and upstream and downstream industry linkage.Then,based on the "push-pull" effect and the direction of labor mobility,the mechanism of FDI and industrial structure adjustment is verified.Finally,the mechanism of FDI and regional economic agglomeration is analyzed based on the direction of regional labor mobility.Fifth,what is the impact of foreign direct investment liberalization on individual welfare level in China? What role does labor mobility play in it? Therefore,this paper carries out analysis based on three steps: First,this paper empirically tests the differential performance of switchers and non-switchers through sub-sample analysis.Then,based on the individual sample of switchers,this paper empirically analyzes the different performance of heterogeneous groups from skill and gender aspects.Finally,it is also very important to investigate the starting point of switching and divide the sample based on the initial year wage level.By studying both the possible initial diversion in switching choice and the switch direction will produce a complete picture of the vertical sorting process in the labor market.Based on the above main research problem,this paper is developed from nine chapters:Chapter one: Introduction.It mainly elaborates the research background and significance of this paper,introduces the main research content,research methods and technology roadmap,and summarizes the main innovations and shortcomings.Chapter two: Literature review.Firstly,this chapter reviews the literatue of the influence of FDI on labor market,including the influence on employment and income.Then,this chapter summarizes the research progress of labor mobility,including the main factors affecting labor mobility,the impact of foreign direct investment on labor mobility,and the results caused by labor mobility.Chapter three: Mechanism analysis.This chapter analyzes the mechanism of FDI’s influence on labor mobility from three aspects: FDI direct and spillover effects,FDI and industrial structure adjustment,and FDI and regional economic agglomeration.Chapter four: China’s FDI liberalization process and labor mobility characteristics.First of all,this chapter introduces the development process of FDI utilization in China,and depicts the differentiated performance of FDI utilization in different stages from multiple dimensions of sector,industry,city and region.Then,this chapter summarizes the development process of China’s FDI policy,and mainly introduces the main content and change trend of the Catalogue for the Guidance of Foreign Investment Industries.Lastly,this chapter explains the specific steps of the construction of labor mobility index,using the China Migrants Dynamic Survey(CMDS)and China Family Panle Studies(CFPS),and finally builds an index system based on the dimensions of region,industry,occupation and year to comprehensively measure the degree of labor mobility.The index can show the evolution characteristics of labor mobility in China,including the region,industry and occupation level labor mobility.Chapter five: The empirical study on the impact of FDI liberalization on regional level labor mobility in China.First of all,this chapter empirically tests the impact of FDI liberalization on regional mobility based on the indicators of city and year level FDI liberalization and the indicators of regional mobility.Then,some robustness checks such as the method of instrumental variables are used to verify the reliability of the baseline results.Finally,the mechanism of the influence of FDI liberalization on regional mobility is discussed.Chapter six: The empirical study on the impact of FDI liberalization on industry level labor mobility in China.First of all,this chapter empirically tests the impact of FDI liberalization on industry mobility based on the indicators of industry and year level FDI liberalization and the indicators of industry mobility.Then,some robustness checks such as the method of instrumental variables and index substitution are used to verify the reliability of the baseline results.Finally,the mechanism of the influence of FDI liberalization on industry mobility is analyzed.Chapter seven: The empirical study on the impact of FDI liberalization on occupation level labor mobility in China.First of all,this chapter empirically tests the impact of FDI liberalization on occupation mobility based on the indicators of industry and year level FDI liberalization and the indicators of occupation mobility.Then,a series of robustness checks such as instrumental variables and index substitution are used to verify the reliability of the baseline results,and the differentiation of heterogeneous groups is also analyzed.Finally,this chapter discusses the mechanism of FDI liberalization affecting occupation mobility and the impact of FDI liberalization on individual level welfare.Chapter eight: Individual welfare analysis.The following questions are discussed in this chapter: What role does labor mobility play in the impact of foreign capital liberalization on labor welfare? Will liberalization of foreign capital improve workers’ welfare? Does the welfare level of different types of floating groups differ? Based on this,this paper uses the Chinese Family Panel Studies(CFPS),which continuously tracks micro-individual’s salary,promotion and a series of subjective feeling variables,and can well observe the changes of individual welfare of workers in different years.Chapter nine: Conclusions and policy suggestions.Through the review of the main findings of this paper,guiding policy recommendations are put forward.Based on the research ideas and content of this paper,the following main conclusions can be drawn:First,the distribution of FDI in China presents the characteristics of industry and regional differentiation.In terms of regions,China’s FDI utilization is mainly concentrated in the eastern coastal areas,which has gradually formed a new development pattern of 4concentrated regions and N hot cities in recent years.In terms of industry,FDI has been concentrated in the tertiary industry from the manufacturing sector.According to the Catalogue from 2007 to 2015,it can be found that the share of encouraged products and services presents an increasing trend,while that of restricted products and services decreases significantly.The development trend of the Catalogue is gradually changing to the direction of the negative list system,and the "thinner and thinner" Catalogue is also an important manifestation of FDI liberalization.Through the analysis of the existing literature,it is found that the relative scientific and reasonable method to measure the degree of FDI liberalization is to construct the FDI liberalization index directly from the perspective of China’s policy.Therefore,this paper constructs FDI liberalization index from the dimensions of city,industry and year.The FDI liberalization in China has different performance in different industries and regions in different years,but the whole shows the development characteristics and trend of gradual opening.Second,with the acceleration of the process of FDI liberalization,the labor factor in China has switch from strict restrictions to gradual liberalization,and then to the strong mobility in regions,industries and occupations.Based on the China Migrants Dynamic Survey(CMDS)from 2010 to 2017,this paper constructs regional level labor mobility index.It is found that China’s floating population is mainly concentrated in the eastern developed areas and major capital cities.Sichuan,Henan,Anhui,Hunan,Shandong and Jiangxi are the top six places of outflow,and Zhejiang,Guangdong,Shanghai,Beijing,Jiangsu and Tianjin are the top six places of inflow.The overall pattern of inter-provincial floating population still shows that it is mainly from the central and western regions to the eastern regions.The floating population in the three major urban agglomerations of Beijing-Tianjin-Hebei,Yangtze River Delta and Pearl River Delta all has the characteristics of geographical proximity.This paper uses China Family Panle Studies(CFPS)from 2010 to2016 to construct labor mobility index in industry and occupation dimensions.It found a sharp decline in the share of the workforce in agriculture-related jobs and a sharp rise in the share of the workforce in services sectors.The flow direction of labor force within the industry shows a step flow to a higher job ladder.The flow of the primary industry to the secondary industry and to the tertiary industry is shown among industries.Third,empirical analysis of the impact of FDI liberalization on regional level labor mobility.The empirical results show that the liberalization of FDI significantly promotes the inter-provincial and inter-city flow of labor force,that is,the more open a city is to FDI,the more it attracts not only the inflow of labor from outside the province but also the inflow of labor from within the province.This paper analyzes the mechanism of FDI liberalization affecting regional labor mobility based on the perspective of FDI and regional economic agglomeration.There are obvious regional differences in the distribution of FDI in China.FDI gradually gathers in developed regions with superior geographical location and perfect infrastructure,and forms a center-periphery industrial layout pattern with less-developed regions.The empirical results show that the liberalization of FDI significantly promotes the flow of labor to the eastern developed regions,the Beijing-Tianjin-Hebei region,the Yangtze River Delta and the Pearl River Delta urban agglomeration.The direction of labor mobility is consistent with that of regional economic agglomeration,which also indicates that the influence of FDI on regional economic agglomeration also promotes the unique direction of labor mobility in China.Fourth,empirical analysis of the impact of FDI liberalization on industry level labor mobility.The empirical results show that the liberalization of FDI significantly promotes industry mobility.On the one hand,labor flows to industries with higher degree of FDI liberalization;on the other hand,the competitive effect caused by FDI will prompt labor to leave industries with higher degree of FDI liberalization.This paper analyzes the mechanism of FDI liberalization affecting industry mobility from the perspective of FDI and industrial structure adjustment.The "push-pull" theory holds that labor mobility is the result of the combined action of the push to move out of the industry and the pull to move into the industry.Based on the theory of the core idea,combined with industry flow direction of the labor force,the empirical finding,under the background of FDI liberalization,labor flows to industries with higher FDI liberalization level,larger scale and higher efficiency,and FDI liberalization significantly promotes the flow of labor to the tertiary industry.Therefore,labor mobility has achieved a better allocation of resources,and the adjustment of labor employment structure has maintained a consistent trend with the optimization and upgrading of China’s industrial structure.Fifth,empirical analysis of the impact of FDI liberalization on occupation level labor mobility.The results show that the liberalization of FDI significantly promotes the occupational mobility of labor force.Heterogeneous groups show the different mobility characteristics,and the liberalization of FDI promotes the occupation switch of low-skilled women and high-skilled men.Younger workers may make voluntary occupation switch in anticipation of higher earnings and better career paths,while older workers may make voluntary occupation switch to a large extent.In addition,this paper discusses the mechanism by using FDI direct and spillover effects.From the perspective of the ownership category,it’s found that FDI liberalization promotes the occupation and industry level labor mobility in local enterprises,but for the mobility of cross-ownership category,the previous work experience and accumulation are still retained that occupation and industry will not changed.From the perspective of upstream and downstream industry links,it is found that the higher the degree of FDI liberalization in downstream industries,the more the labor force tends to change in occupation and industry,which also reflects the characteristics of labor flow from the primary industry to the secondary industry and from the secondary industry to the tertiary industry.Sixth,this paper analyzes the impact of FDI liberalization on labor mobility from the perspective of individual welfare.First,I empirically test the differences between switchers and non-switchers from the aspects of occupations and industries,and find that switchers have improved their monthly wage,promotion,confidence in the future and health condition.Second,this paper analyzes the distributive effect of individual welfare.On one hand,based on the sample of individuals who switch occupation or industry,this paper empirically analyzes the differential performance of heterogeneous groups,and finds that only highly skilled labor,male and labor located in the east and central regions have realized the increase of monthly wages and promotion.On the other hand,from the perspective of base period income,the complete picture of vertical classification process of labor market is obtained by studying the initial flow and flow direction of workers.The empirical results show that the liberalization of FDI leads to the mobility of high income workers,and only high income wokers can realize the increase of monthly wage after switching their occupations or industries,which reflects the widening of income gap and gender gap.Therefore,the findings of this paper also enrich the research on labor mobility from the perspective of income inequality and gender gap.According to the research conclusions of this paper,the following suggestions are proposed:First,the introduction of FDI should be carried out in both quantity and quality,and in regions and industries.At the policy level,the phased opening of China’s FDI policy provides a solid institutional guarantee for the advancement of FDI liberalization,and the steady growth of China’s FDI utilization scale lays an important foundation for the continuous flow of labor factors.The constant adjustment of FDI policy should face the development needs of different stages,the main economic battlefield and the frontier of science and technology.At the industrial level,it should reasonably guide the FDI distribution in industries,and guide the transfer of FDI from labor-intensive to capital-intensive and then to knowledge-and technology-intensive industries,so as to meet the needs of economic transformation and upgrading.At the same time of ensuring the balanced development between industries,targeted cultivation of key industries to use FDI,actively promote the two-way construction of FDI utilization and structure adjustment.Maintain and expand the influence of superior service industry,and rationally plan the development pattern of emerging service industry and technology-intensive industry.Compared with the manufacturing industry,the service industry pays more attention to the allocation of human capital.The concentration of FDI in the service industry promotes the rapid development of new industries,new forms of business and new modes,realizes various flexible employment modes,absorbs a large number of workers and promotes the orderly flow of labor force.At the regional level,FDI should be encouraged to tilt toward the central and western regions to extend the spatial corridor of industrial agglomeration and industry chain.The implementation of FDI policy should be organically combined with the infrastructure construction.The linkage development of eastern,central and western regions should be encouraged,and the gap of opening up to FDI can be narrowed through trans-regional cooperation,and the overall development of FDI in China will be improved and upgraded.We should reasonably guide workers to find jobs in key areas and guide the return of some floating population,to improve workers’ employment quality and the sense of well-being.Second,give full play to the positive effects of FDI and expand the space for the independent labor mobility.In terms of FDI direct effect,it can directly create new jobs and increase the demand and flow of labor force by making use of greenfield investment and merger and acquisition.In addition,for service multinationals,especially in the highly globalized service sectors such as information technology,research and development,consulting and financial services,it is people who truly create value,thus increasing the demand for highly skilled labor.Therefore,the direct effect of FDI on the labor market itself can smoothly realize the labor mobility.In terms of FDI spillover effects,we should give full play to the positive radiation effect of FDI,improve the linkage mechanism between local market and inflow capital,effectively integrate domestic and foreign resources,and realize the mutual integration of domestic and foreign advanced models.We should vigorously encourage the spillover of advanced technology,management mode and fair system to local enterprises,and continue to give play to the effective correlation between upstream and downstream industries to realize the coordinated development of the whole industry chain.Promote the employment of foreign-funded enterprises and enterprises in related industries,and promote the orderly flow of labor force between foreign-funded enterprises and local enterprises,between upstream and downstream of the industrial chain.In addition,the absorption capacity of local enterprises to FDI should be improved,and the healthy development of local enterprises should be properly protected to avoid vicious competition caused by foreign investment.For smaller and less competitive industries and enterprises,excessive competition is not conducive to the better development.Therefore,on the basis of maintaining industrial security,it is necessary to implement the opening-up policy in stages according to the development situation of the industry and the region,and create a good environment for the development of local industries and the growth of enterprises through appropriate industrial protection.Third,consolidate the strategy of reinvigorating China through human resource development and build channels for the career development of the labor force.On one hand,in view of the existing problems of workers unwilling to be farmers,we should fully protect the legal rights of farmers while consolidating the position of the primary and secondary industries,provide good system security and employment environment for workers,and reduce the involuntary labor mobility.On the other hand,in view of the lack of attraction of skilled employment,we should constantly expand the team of applied,innovative and skilled talents,break the "ceiling" and "invisible door" of the occupation,form the promotion ladder,and realize the coordinated development of skilled workers and low-skilled workers.Specifically speaking,first of all,build high-quality education system,cultivate the domestic talent market.In the era of knowledge economy,human capital is the key factor to absorb and utilize FDI,and also the important handle to connect with high quality FDI.The government needs to increase investment in human capital,pay attention to the effective combination of general education and skill training,and perfect the combination of production,education and research.In addition,promote supply-side structural reform to provide more high-quality jobs for highly skilled workers.Second,establish vocational training system in the main place of labor inflow,guide enterprises to establish a sound wage distribution system in line with the characteristics of workers.We should innovate various training modes,such as full-time training and on-the-job training,promote the accumulation and mutual recognition system of professional experience,realize the organic combination of social training and enterprise training,improve the social recognition of vocational training and results,and finally form a perfect channel for the career development of workers,providing a platform and guarantee for labor mobility.Fourth,remove institutional barriers to labor mobility and form a public service system for the floating population.The scale of China’s floating population is huge,and it is the key to ensure the orderly and healthy labor mobility to deal with the problems of the floating population reasonably.First of all,we should fully respect the laws of labor mobility,continue to remove institutional barriers to labor mobility,relax institutional restrictions on employment and entrepreneurship,and give full play to the initiative of workers.For the rural to urban floating population,it is necessary to continuously improve the inclusiveness of cities,and speed up the registration of permanent residence,so that the floating population can have a sense of belonging in the city.For the floating population between urban areas,with the improvement of China’s urbanization level,the trend of inter-city floating population will increase.The trans-regional recognition model of social security and medical insurance should be vigorously promoted to create a good social environment for the floating population.Then,expand the benefits scope of the service system.The formulation and implementation of various social security and public service systems should fully consider the vital interests of the floating population,and benefit the whole floating families,left-behind children and elderly groups.The imperfection of the system hinders labor mobility and causes the ineffective use and waste of family and social resources.The improvement of the system ensures the stable employment of the floating population and achieves a win-win situation of personal value and social benefits.The main innovations of this paper are shown in the following aspects:First,based on the research perspective,this paper focuses on the unique phenomenon of labor mobility in China,and conducts an in-depth research on the relationship of FDI and labor mobility.It is the first study in China to systematically analyze the impact of FDI liberalization on labor mobility.Since the founding of the People’s Republic of China,China once implemented the planned economy system,which to a certain extent resulted in the distorted allocation of human capital and restricted the free flow of human capital.However,with the gradual advance of FDI liberalization,labor mobility in China presents the characteristics from strict restrictions to gradually open,and then to labor factors with strong mobility.As an important part of China’s opening up to the outside world,the introduction of FDI directly or indirectly affects the domestic labor market.The differentiation of FDI in periods,industries and regions dimensions in China have given birth to the unique phenomenon of labor mobility.At present,the impact of FDI on the Labor market has attracted much attention,the existing research mainly discusses around the FDI and employment level and structure,income level and income gap,etc..Studies of FDI and labor mobility have not yet formed perfect system,and few studies analyze these two relationships under the framework of natural experiment.Foreign studies have already formed the comparatively abundant research framework on labor mobility especially the micro level occupational mobility,which discuss the main factors of labor mainly from globalization,trade liberalization,industrial structure adjustment,and political system,but the research from the FDI perspective is still a field need to be developed and expanded.Therefore,this paper combines FDI and labor mobility into a unified analysis framework.As a ground-breaking study to analyze the impact of FDI liberalization on occupation mobility,it is an important innovation of research perspective.This paper aims to provide some new suggestions on how to guide the rational and orderly labor mobility in the process of China’s FDI liberalization.Second,based on the research content,this paper constructs a comprehensive FDI liberalization index system from the dimensions of city,industry and year,and a system of labor mobility index system from the dimensions of region,industry,occupation and year.In addition,this paper tries to empirically discuss the mechanisms of FDI liberalization on labor mobility,and analyzes the impact of FDI liberalization on labor mobility from the perspective of individual welfare.With the deepening of China’s FDI liberalization degree and the continuous improvement of the FDI policy innovation,China’s utilization of FDI in the pattern and degree have changed a lot.This paper reviews China’s FDI policy to construct FDI liberalization index,and using individual level data to describe the direction and scale of labor mobility.Since there is few research on the FDI and labor mobility in China,mechanism analysis becomes more important and difficult.This paper conducts theoretical and empirical mechanism analysis and exam it from the perspectives of FDI direct and spillover effects,industrial structure adjustment and regional economic agglomeration.What’s more,this paper describes the vertical sorting process of labor market through a three-step empirical study.The empirical results show that although the FDI liberalization improves the welfare level of switchers,it also leads to the widening of wage gap and gender gap.Therefore,the findings of this paper enrich the research on labor mobility.Third,based on research methods,this paper uses the Catalogue as the external policy shock to build relative exogenous FDI liberalization index,and uses the instrumental variable method to overcome the endogenous problems that may exist in the empirical analysis.In addition,small changes in individual characteristic variables have little impact on macroeconomic variables.At present,few relevant studies go deep into the individual level,especially by using individual panel data to carry out discussions.Based on this,this paper uses individual micro data to reflect the performance of labor mobility,which can also better solve the endogenous problems existing in previous studies to a certain extent.