GLOBALIZATION, TRADE, AND WAGES: WHAT DOES HISTORY TELL US ABOUT CHINA?

Kris James Mitchener and Se Yan

International Economic Review, 2014, vol. 55, issue 1, 131-168

Abstract: Newly assembled data show that, as China opened up to global trade during the early 20th century, its exports became more unskilled‐intensive and its imports more skill‐intensive. Difference‐in‐differences estimates show that World War I dramatically increased Chinese exports, raising the relative demand for the unskilled workers producing them. When the war ended, trade costs declined and China's terms of trade increased, further stimulating exports. A simulation of a dynamic general equilibrium model demonstrates that the effects of the war on China's terms of trade produces a decline in the skill premium similar to what China experienced in the 1920s.

Date: 2014
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