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Does global value chain engagement improve firms' wages: Evidence from China

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  • Yue Lu
  • Yunlong Lu
  • Rui Xie
  • Xiao Yu

Abstract

Better understanding of the effect of the global value chain (GVC) on wages is a key issue for determining welfare gains from engagement in international integration. We study whether and how China's engagement in the GVC enhances firms' wage by using firm‐level and customs transaction‐level data covering the period 2000–06 with the methods of propensity score matching (PSM), difference in differences (DID) and generalised propensity score (GPS). The empirical results show that first, GVC engagement can improve firms' wage. Second, the improvement effect is more prominent in capital‐intensive and foreign‐invested enterprises. Third, the degree of embedment in the GVC shows a U‐shaped relationship with wages (the marginal improvement changes from decreasing to increasing). Finally, by analysing the mechanism, we find that participation in the GVC ultimately improves the overall wage level of enterprises through the productivity effect and the reallocation effect of labour demand.

Suggested Citation

  • Yue Lu & Yunlong Lu & Rui Xie & Xiao Yu, 2019. "Does global value chain engagement improve firms' wages: Evidence from China," The World Economy, Wiley Blackwell, vol. 42(10), pages 3065-3085, October.
    • Handle: RePEc:bla:worlde:v:42:y:2019:i:10:p:3065-3085
    DOI: 10.1111/twec.12805
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    Cited by:

    1. Valentine Fays & Benoît Mahy & François Rycx, 2023. "Wage differences according to workers' origin: The role of working more upstream in GVCs," LABOUR, CEIS, vol. 37(2), pages 319-342, June.
    2. Simola, Heli, 2021. "The impact of Covid-19 on global value chains," BOFIT Policy Briefs 2/2021, Bank of Finland Institute for Emerging Economies (BOFIT).
    3. Yue Hua & Yue Lu & Ruili Zhao, 2022. "Global value chain engagement and air pollution: Evidence from Chinese firms," Journal of Economic Surveys, Wiley Blackwell, vol. 36(3), pages 708-727, July.
    4. Shuang Meng & Huan Yan & Jiajie Yu, 2022. "Global Value Chain Participation and Green Innovation: Evidence from Chinese Listed Firms," IJERPH, MDPI, vol. 19(14), pages 1-17, July.

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