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China's Skill-Biased Imports

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  • Li, Hongbin

    (Stanford University)

  • Li, Lei

    (University of Mannheim)

  • Ma, Hong

    (Tsinghua University)

Abstract

China has witnessed rapid increases in the skill premium over the last few decades. In this paper, we study the short-run effect of capital goods imports on skill premium in China. The surge in capital goods imports, which embody advanced technology, can explain the rising demand for skills in China. We exploit regional variations in capital goods import exposure stemming from initial differences in import structure and instrument for the capital goods import growth using exchange rate movements. A city at the 75th percentile of the distribution of capital goods imports growth has a higher skill premium by 5 percentage points (0.38 standard deviation) over the one at the 25th percentile. To explore the underlying mechanism, we provide firm-level evidence and show that imported capital goods are skill-complementary.

Suggested Citation

  • Li, Hongbin & Li, Lei & Ma, Hong, 2022. "China's Skill-Biased Imports," IZA Discussion Papers 15423, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15423
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    More about this item

    Keywords

    imported capital goods; skill-biased technological change; skill premium;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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