The Effects Of Intermediate Product Imports On Wage Gap Of China’s Manufacturing Sectors

With the international production systems evolving constantly, Nowadays,China’s wage gap is becoming increasingly prominent and it has become the focus ofattention. The wage gap of China’s industries mainly manifests in two aspects: thewage gap between different industries continues to expand; the wage gap betweenskilled and unskilled workers in the same industry is also expanding. From the pointof view of trade theory, whether intermediate product imports expand or narrow thewage gap is uncertain, depending on the production effect，substitution effect andindustry effect. When we take account of sector characteristics, we will find that thedifferences of factor intensity among sectors lead to the differences of the effect ofintermediate product imports on relative wage gap. Therefore, this research not onlyhelps to deepen the understanding and knowledge of intermediate product imports,but also helps to design policy recommendations for improving wage cap from thepoint of view of intermediate input. It also helps to make effective distributionpolicies, to better address the relationship between efficiency and equity, as well as toenhance China’s position in international division of labor.Based on1997,2002and2007Input-Output Table, the paper measures andanalyzes the degree of intermediate product imports, horizontal intermediate productimports, vertical intermediate product imports of28manufacturing sectors in1995-2011.We analyze the wage gap of inter-industry and industry and build atheoretical model of intermediate product imports and wage gap. We then make anempirical study on how intermediate product imports affect the wage gap of28manufacturing sectors from the point of view of inter-industry and industry. Whentaking account of sector characteristics,28manufacturing sectors are categorized intotechnology-intensive sectors, labor-intensive sectors and capital-intensive sectors. Thespecific conclusions of the study are as follows: First, China’s intermediate productimports have an increasing trend, when we take account of sector characteristics,intermediate product imports of technology-intensive sectors increased significantly, intermediate product imports of labor-intensive sector shows a decreasing trend inrecent years. Secondly, the wage gap of inter-industry and industry of28manufacturing sectors continues to expand. On one hand, the wage gap betweendifferent industries continues to expand, Technology-intensive sectors have relativelyhigh wage levels and labor-intensive sectors have relatively low wage levels. On theother hand, the skilled and unskilled workers’ wage gap in the same industry is alsoexpanding. Thirdly, intermediate product imports will expand our industry andinter-industry wage gap. Vertical intermediate product imports bring aboutmanufacturing effect, which expands the wage gap. Horizontal intermediate productimports bring about both manufacturing effect and substitute effect, it will expandindustry wage gap, but it has no significant effects on inter-industry wage gap.Fourthly, when we take account of sector characteristics, for the inter-industry wagegap, intermediate product imports have a significant effect on technology-intensivesectors and capital-intensive sectors, but it has no significant effects on labor-intensivesectors. For the industry wage gap, compared with capital-intensive sectors,intermediate product imports have a greater impact on technology-intensive sectors,capital-intensive sectors. Based on the above findings, the paper provides some policysuggestions.