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Trade liberalisation, market competition and wage inequality in China's manufacturing sector

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  • Anwar, Sajid
  • Sun, Sizhong

Abstract

Economic reforms of the late 1980s have contributed to rapid economic growth in China. While the overall standard of living has improved, economic growth has also resulted in an increase in income inequality. Rising income inequality can increase social tensions that can impede further economic growth. By making use of firm level panel data, this paper focuses on the impact of increased market competition and trade liberalisation on skilled–unskilled wage inequality in China's manufacturing sector. A theoretical model is used to argue that trade liberalisation and market competition can affect skilled–unskilled wage inequality. Based on this result, an econometric model is specified. The empirical analysis presented in this paper shows that increased trade liberalisation has contributed to an increase in skilled–unskilled wage inequality in China's manufacturing sector. However, increase in market competition has the opposite effect.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 4 ()
Pages: 1268-1277

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1268-1277

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Wage inequality; Trade liberalisation; Product market competition; China;

References

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Cited by:
  1. Charfeddine Lanouar & Zouhair Mrabet & Frederic Teulon, 2014. "Tunisian labor market responses to trade liberalization: A dynamic analysis," Working Papers 2014-504, Department of Research, Ipag Business School.
  2. Pi, Jiancai & Zhou, Yu & Yin, Jun, 2013. "International factor mobility, monopolistic competition, and wage inequality," Economic Modelling, Elsevier, vol. 33(C), pages 326-332.

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