Impacts of global value chains' participation and domestic consumption on manufacturing employment in China

Ping Hua ()
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Ping Hua: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: The literature on the employment impact of China's GVCs participation has focused on the Chinese imports substitution effects in developed countries, while few studies are made on the impact on domestic job creations. To complete this gap, this study proposes GVCs labor demand functions, which is augmented of domestic demand to control the impact of the Chinese reorientation development strategy to domestic consumption-led growth model (rarely studied). The functions are applied to panel data of 16 Chinese manufacturing industries over the 2005-2014 period using Arellano and Bond's GMM estimator for dynamic panel data model specifications. The obtained results show that China's backward linkages increased employment while forward linkages and GVCs position decreased it. The decline in processing and assembly activities of 3.4% per year on average diminished the employment of 0.9%. The increase of 0.95% per year on average of Chinese intermediate goods embodied in third countries' exports decreased the employment of 0.3%. The rise in final domestic demand of 20% per year on average increased the employment of 1.6% per year on average, which is higher than the negative effects of backward and forward linkages. These results provide a favor argument for China's "dual circulation" development strategy from the point of view of employment.

Keywords: GVCs; domestic consumption; manufacturing employment; China (search for similar items in EconPapers)
Date: 2022-11-05
New Economics Papers: this item is included in nep-cna and nep-int
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