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Intermediate inputs trade on income distribution in China : Theory and Evidence

Author: ChenJingHua
Tutor: LiuQingLin
School: Shandong University
Course: International Trade
Keywords: International industrial transfer Intermediate input trade relative wage reforming promotion
CLC: F752.68;F224
Type: Master's thesis
Year: 2006
Downloads: 283
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Abstract


Trade liberalization that takes the manufacturing international industrial transfer, service international industry transfer and the foreign direct investment as carrier is the main performance of economy globalization. Corresponding to the international industrial transfer is the increasing of Intermediate input trade that has increased the share of processing trade in developing countries. Since 1980s, many scholars have argued that whether the expansion of trade between developed countries and developing countries influence the relative wages of skilled worker. Now we should pay more attention to this question, especially to the impact of the enlarging share of processing trade in developing countries on domestic income distribution. In this paper, we study the effects of the expansion of processing trade on domestic income distribution in manufacturing industry using the method of combining the theoretical and empirical research.In this paper, we first introduce the status of Intermediate input trade both in the world and in China. In the second section, we review the correlative theoretical and empirical studies on trade liberalization influencing income distribution. The third section takes Feenstra’s simply Intermediate input trade model as the theory supporting of later empirical analysis. The next is empirical analysis, in this section we will examine whether Intermediate input trade—processing trade has contributed to an increasing in relative wages for skilled/unskilled labors. We use the wage share of every subdivisional industry in the total wage of manufacturing industry as dependent variable. The independent variables include export share, import share, capital/output ratio and total capital contributed ratio. And then the regression result is that the processing trade in manufacturing industry has contributed to an increasing in relative wages for skilled/unskilled labors in export sections.According to the results of theoretical and empirical research in this paper, we conclude that it can treat processing trade as a macroeconomic policy by using local endowment as low-cost labors to develop processing trade if our country will adjust the unequal income distribution in domestic and promote economy increasing. Furthermore, China must hold the opportunity one hand to use the processing trade to receive international industrial transfer, and on the other hand to take measures to promote the processing trade level. Therefore, the urgent thing we must do is to expand Intermediate input trade, receive service international industry transfer, and impel the processing trade reforming promotion.

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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