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Does China Still Have a Labor Cost Advantage?

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  • Janet Ceglowski
  • Stephen Golub
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    Abstract

    In recent years wages in China have been rising and the yuan has appreciated, potentially eroding China’s cost advantage in manufactures. This paper explores the evolution of China’s relative unit labor costs in manufacturing over 1998-2009. Between 1998 and 2003 China’s unit labor costs fell, but since 2003 they have increased both absolutely and relative to US unit labor costs. Much of the rise in China’s relative unit labor costs can be traced to a real appreciation of the yuan against the dollar. Despite the recent rise, China’s unit labor costs remain low relative to those in most other countries.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-09/cesifo1_wp3579.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3579.

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    Date of creation: 2011
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    Handle: RePEc:ces:ceswps:_3579

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    Related research

    Keywords: China; labor costs; productivity; international competitiveness; real exchange rate;

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    1. Dennis Tao Yang & Vivian Chen & Ryan Monarch, 2009. "Rising Wages: Has China Lost Its Global Labor Advantage?," Economics Program Working Papers, The Conference Board, Economics Program 09-03, The Conference Board, Economics Program.
    2. Michiel Dijk, 2003. "South African Manufacturing Performance In International Perspective 1970-1999," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 71(1), pages 119-142, 03.
    3. Immaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Sebastian Vollmer, 2007. "Competitiveness – A Comparison of China and Mexico," CESifo Working Paper Series 2111, CESifo Group Munich.
    4. Mulder, Nanno & Montout, Sylvie & Perez Lopes, Luis, 2002. "Brazil and Mexico's manufacturing performance in international perspective, 1970-1998," GGDC Research Memorandum, Groningen Growth and Development Centre, University of Groningen 200252, Groningen Growth and Development Centre, University of Groningen.
    5. Adam Szirmai & Ruoen Ren & Manyin Bai, 2005. "Chinese Manufacturing Performance in Comparative Perspective, 1980-2002," Working Papers, Economic Growth Center, Yale University 920, Economic Growth Center, Yale University.
    6. Edwards, Lawrence & Golub, Stephen S., 2004. "South Africa's International Cost Competitiveness and Exports in Manufacturing," World Development, Elsevier, Elsevier, vol. 32(8), pages 1323-1339, August.
    7. Nanno Mulder & Sylvie Montout & Luis Peres, 2002. "Brazil and Mexico's Manufacturing Performance in International Perspective, 1970-1999," Working Papers 2002-05, CEPII research center.
    8. Rawski, Thomas G. & Xiao, Wei, 2001. "Roundtable on Chinese Economic Statistics Introduction," China Economic Review, Elsevier, Elsevier, vol. 12(4), pages 298-302.
    9. Erumban, Abdul A., 2007. "Productivity and Unit Labor Cost in Indian Manufacturing: A Comparative Perspective," GGDC Research Memorandum, Groningen Growth and Development Centre, University of Groningen 200796, Groningen Growth and Development Centre, University of Groningen.
    10. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, vol. 12(2), pages 171-174, June.
    11. Bart van Ark & Abdul Azeez Erumban & Vivian Chen & Utsav Kumar, 2009. "the Cost Competitiveness of the Manufacturing Sector in China and India: An Industry and Regional Perspective," Economics Program Working Papers, The Conference Board, Economics Program 09-02, The Conference Board, Economics Program.
    12. Inklaar, Robert & Wu, Harry & Ark, Bart van, 2003. ""Losing ground" : Japanese labour productivity and unit laboour cost manufacturing in comparison to the U.S," GGDC Research Memorandum, Groningen Growth and Development Centre, University of Groningen 200364, Groningen Growth and Development Centre, University of Groningen.
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    Cited by:
    1. ITO Keiko & SHIMIZU Junko, 2013. "Industry-Level Competitiveness, Productivity, and Effective Exchange Rates in East Asia," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13094, Research Institute of Economy, Trade and Industry (RIETI).

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