NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Globalization, Trade & Wages: What Does History tell us about China?

Kris James Mitchener, Se Yan

NBER Working Paper No. 15679
Issued in January 2010
NBER Program(s):   DAE   ITI

Chinese imports and exports grew rapidly during the first three decades of the twentieth century as China opened up to global trade. Using a new data set on the factor-intensity of traded goods at the industry level, we show that Chinese exports became more unskilled-intensive and imports became more skill-intensive during these three decades. The exogenous shock of World War I dramatically raised the price of Chinese exports and increased the demand for these goods overseas and for unskilled workers producing these goods in China. When the war ended, trade costs declined, leading to a rise in China’s terms of trade and further growth in China’s export sector. Difference-in-differences regression estimates show that World War I boosted exports in China and did so substantially more for unskilled industries than skilled industries. We show that the observed decline in the skill premium in China is consistent with China’s changing terms of trade. The skill-unskilled wage ratio flattened out during the 1910s and then fell by eight percent during the 1920s. We simulate the effects of World War I using a dynamic, general equilibrium factor-endowments model of trade, and demonstrate that an exogenous shock to the price of traded goods can produce a decline in the skill premium similar to what China experienced in the 1920s.

download in pdf format
   (328 K)

email paper

This paper is available as PDF (328 K) or via email.

This paper was revised on May 20, 2013

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15679

Users who downloaded this paper also downloaded these:
Hsieh and Ossa w16778 A Global View of Productivity Growth in China
Manova and Zhang w15249 China's Exporters and Importers: Firms, Products and Trade Partners
Feenstra and Wei w14716 Introduction to “China’s Growing Role in World Trade”
Branstetter and Lardy w12373 China's Embrace of Globalization
Stiglitz w15718 Risk and Global Economic Architecture: Why Full Financial Integration May Be Undesirable
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us