Empirical Research On Trade And Employment Adjustment Of Manufacturing Industry In China

Employment is the main object of economy development and social stability. Many theoretical and practical studies have suggested the important relationship between trade and employment. Trade has contributed much to the development of our society in the last thirty years, and at the same time, it also has been the main power to maintain and increase the employment. Manufacturing industry as the largest export industry has become the main source of employment. It has both practical and theoretical meanings to analysis the relationship between trade and employment in manufacturing industry.We first review the literature about the relationship between trade and employment, and then concentrate on the mechanism of how the trade affects employment from the effects of substitution and output. The output effect is that trade will lead to more demand for product and then cause the demand for labor increase. The substitution effect is that when wages rise, the industry substitutes away from labor towards other factors, and with higher costs the industry produces less output such that it demands less of all factors, including the labor. This paper considering the practical experience to explain the trade effects on the structure change of product and employment after Reform and Opening up and entering the WTO. Then we use the statistics and econometrics methods to analyze the tendency of long term employment and the determinants of industrial employment. At last we propose some conclusions and policies.Through theoretical and empirical analysis, we get the following conclusions. First, trade has positively effects on employment in the current trade structure. Second, the paths that trade affect the employment are still output effect and substitution effect. The results of the econometrics indicate that the elasticity of employment with respect to output and wages is respectively 0.56 and -0.5. That is when the output and wages rise 1%, the employment will rise 0.56% and decline 0.5% respectively. Third, that trade is apt to be affected by the external shock lead to the employment of manufacturing industry and even the whole employment to fluctuate. So expand the trade and keep the wage stable moderately will increase the employment.