Trade expansion and employment generation: how mercantilist does China have to be?

Xiao Jiang

International Review of Applied Economics, 2013, vol. 27, issue 4, 557-573

Abstract: We conduct an input--output analysis of China's employment changes due to changes in trade structure on a sectoral level. We find that between 2002 and 2007 China generated about 71 million jobs due to trade expansion. We also estimate the additional amount of trade that would be needed if China were using its trade surplus as the main tool to absorb its excess labour. Given the magnitude of this estimated amount, we conclude that this 'mercantilist' approach to excess labour absorption is not feasible. Finally, using Spearman rank correlation analysis, we find that the ranking of China's sectors' employment generation capacities is inversely related to the ranking of these sectors' trade performances. This suggests that the 'mercantilist' approach to excess labour absorption is not only infeasible but also inefficient. We end the paper by suggesting a more balanced growth path for China.

Date: 2013
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DOI: 10.1080/02692171.2012.760068

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