| International trade has been cited as a source of widening wage inequality in industrial nations. In this paper, I investigate how the structure of the wage premium has been impacted within the United States due to rising trade with China. Using the U.S. Census data, since China joined WTO, I find the presence of the skill premium and over time the skill premium is higher. A counterfactual exercise indicates rising U.S. exports to China increase the wages of workers, especially for high-skilled laborers, and the effect is more pronounced in 2010. At the same time, increasing imports from China increase wages of high-skilled workers in the U.S., but push wages down for low-skilled workers. I also find strong evidence that less trade costs dramatically increase individual's wage rates; and the more education he/she has, the more wage growth he/she can benefit from decreasing trade costs. Rising trade balances actually promote wages for unskilled workers and decrease wages for skilled workers and its impacts on wages are falling and become relatively modest in the year 2010. In the end, I conclude that overall speaking, rising trade with China and less trade costs widen wage inequality in U.S.. |
