The Influence Mechanisms Of International Trade On China’s Wage Gap

With the reform and opening up, China is closely involving in international economic cooperation, in the meanwhile, China continues to expand the scale of foreign trade. However, China experiences not only the booming economy, but also the expanding income gap. Many scholars focus on the relationship between China’s international trade and the wage gap from a macroscopic angle. In this paper, the influence mechanism of international trade on China’s wage gap would be analyzed from a micro angle, including the process description of these influence mechanisms and the empirical tests of these mechanisms on the wage gap.A literature review about international trade affect the wage gap would be showed in the first part. The second part focuses on influence mechanisms of international trade on the wage gap, including the price mechanism, the technology mechanism, the enterprise behavior mechanism, the labor demand elasticity mechanism, the consumer preference mechanism and the policy protection mechanism. The third part describes China’s international trade and wage gap, what’s more, focuses on the foreign trade and wage of manufacture. The fourth part make the empirical analyses to verify the role of international trade and its influence mechanisms on the wage gap with the panel data of manufacture. The empirical result shows that with the increase of the whole trade, the export trade and the import trade would tend to expand the wage gap between different subdivided industries; in the meanwhile, under these circumstances, the technology progress and the industry profit would expand the wage differentials between different subdivided industries, however, the firm behavior and the industry scale will narrow the wage gap between different subdivided industries. Finally, to sum up, some suggestions to improve the China’s wage gap in manufacture would be provided in the final part.