IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

How does real exchange rate influence labour productivity in China?

Listed author(s):
  • Guillaumont Jeanneney, Sylviane
  • Hua, Ping

Since China's transition to a market economy, the labour productivity growth has been dramatically rapid, in particular since 1994. This speeding up has been accompanied by the reverse of the exchange rate policy of China, which has strongly depreciated its currency before 1994, and then either appreciated or stabilized it. The theoretical arguments suggesting several kinds of real exchange rate impact on labour productivity are developed. An econometric model is then proposed and estimated, using panel data for the twenty-nine Chinese provinces and for the period from 1986 to 2007. The econometric results show that the appreciation of the real exchange rate had a favourable effect on the labour productivity growth, leading to a kind of virtuous circle: the real appreciation of the currency boosts the growth of labour productivity while, according to the Balassa–Samuelson effect, productivity growth tends to push up the real appreciation. Moreover, this favourable effect is stronger in inland provinces than in coastal provinces, contributing to a minimizing of the gap between inland and coastal provinces.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S1043951X10000465
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 22 (2011)
Issue (Month): 4 ()
Pages: 628-645

as
in new window

Handle: RePEc:eee:chieco:v:22:y:2011:i:4:p:628-645
DOI: 10.1016/j.chieco.2010.04.008
Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Wu, Harry X., 2001. "China's comparative labour productivity performance in manufacturing, 1952-1997: Catching up or falling behind?," China Economic Review, Elsevier, vol. 12(2-3), pages 162-189.
  2. Ping Hua, 2007. "Real exchange rate and manufacturing employment in China," Post-Print hal-00159151, HAL.
  3. Fleisher, Belton M. & Chen, Jian, 1997. "The Coast-Noncoast Income Gap, Productivity, and Regional Economic Policy in China," Journal of Comparative Economics, Elsevier, vol. 25(2), pages 220-236, October.
  4. Guillaumont Jeanneney, S. & Hua, P., 2001. "How does real exchange rate influence income inequality between urban and rural areas in China?," Journal of Development Economics, Elsevier, vol. 64(2), pages 529-545, April.
  5. Guillaumont Jeanney, Sylviane & HUA, Ping, 2002. "The Balassa-Samuelson effect and inflation in the Chinese provinces," China Economic Review, Elsevier, vol. 13(2-3), pages 134-160.
  6. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
  7. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
  8. Liu, Tung & Li, Kui-Wai, 2006. "Disparity in factor contributions between coastal and inner provinces in post-reform China," China Economic Review, Elsevier, vol. 17(4), pages 449-470.
  9. Li, Xiaoying & Liu, Xiaming & Parker, David, 2001. "Foreign direct investment and productivity spillovers in the Chinese manufacturing sector," Economic Systems, Elsevier, vol. 25(4), pages 305-321, December.
  10. Sylvie Guillaumont-Jeanneney & Ping Hua & Claude Jessua, 1996. "Politique du change et développement des exportations manufacturées en Chine," Revue Économique, Programme National Persée, vol. 47(3), pages 851-860.
  11. Wang, Yan & Yao, Yudong, 2003. "Sources of China's economic growth 1952-1999: incorporating human capital accumulation," China Economic Review, Elsevier, vol. 14(1), pages 32-52.
  12. Lu, Ding & Yu, Qiao, 1999. "Hong Kong's exchange rate regime:: Lessons from Singapore," China Economic Review, Elsevier, vol. 10(2), pages 122-140.
  13. Dougherty, Sean & Herd, Richard & He, Ping, 2007. "Has a private sector emerged in China's industry? Evidence from a quarter of a million Chinese firms," China Economic Review, Elsevier, vol. 18(3), pages 309-334.
  14. Nicole Madariaga & Sandra Poncet, 2007. "FDI in Chinese Cities: Spillovers and Impact on Growth," The World Economy, Wiley Blackwell, vol. 30(5), pages 837-862, 05.
  15. Chow, Gregory C., 2006. "New capital estimates for China: Comments," China Economic Review, Elsevier, vol. 17(2), pages 186-192.
  16. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  17. Jinzhao Chen, 2009. "Beyond Cheap Talks: Assessing the Undervaluation of the Chinese Currency Between 1994 and 2007," Economie Internationale, CEPII research center, issue 119, pages 47-82.
  18. Jefferson, Gary H. & Su, Jian, 2006. "Privatization and restructuring in China: Evidence from shareholding ownership, 1995-2001," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 146-166, March.
  19. Gary H. Jefferson & Albert G. Z. Hu & Jian Su, 2006. "The Sources and Sustainability of China's Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 1-60.
  20. Can-fei He & Sheng-jun Zhu, 2009. "Industrial agglomeration and labour productivity in transition: an empirical study of Chinese manufacturing industries," Post-Communist Economies, Taylor & Francis Journals, vol. 21(1), pages 103-115.
  21. Xiaolan Fu & V. N. Balasubramanyam, 2005. "Exports, Foreign Direct Investment and Employment: The Case of China," The World Economy, Wiley Blackwell, vol. 28(4), pages 607-625, 04.
  22. Galina Hale & Cheryl Long, 2011. "Are There Productivity Spillovers From Foreign Direct Investment In China?," Pacific Economic Review, Wiley Blackwell, vol. 16(2), pages 135-153, 05.
  23. Holz, Carsten A., 2006. "New capital estimates for China," China Economic Review, Elsevier, vol. 17(2), pages 142-185.
  24. Liu, Xiaming & Parker, David & Vaidya, Kirit & Wei, Yingqi, 2001. "The impact of foreign direct investment on labour productivity in the Chinese electronics industry," International Business Review, Elsevier, vol. 10(4), pages 421-439, August.
  25. Cai, Fang & Wang, Dewen & Du, Yang, 2002. "Regional disparity and economic growth in China: The impact of labor market distortions," China Economic Review, Elsevier, vol. 13(2-3), pages 197-212.
  26. Jianhong Qi & Yingmei Zheng & James Laurenceson & Hong Li, 2009. "Productivity Spillovers from FDI in China: Regional Differences and Threshold Effects," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(4), pages 18-35.
  27. Hua, Ping, 2007. "Real exchange rate and manufacturing employment in China," China Economic Review, Elsevier, vol. 18(3), pages 335-353.
  28. Holz, Carsten A., 2006. "Response to Gregory C. Chow's "New Capital Estimates for China: Comments"," China Economic Review, Elsevier, vol. 17(2), pages 193-197.
  29. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
  30. Jinghai Zheng & Angang Hu, 2006. "An Empirical Analysis of Provincial Productivity in China (1979-2001)," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 4(3), pages 221-239.
  31. Peter J Buckley & Jeremy Clegg & Chengqi Wang, 2002. "The Impact of Inward FDI on the Performance of Chinese Manufacturing Firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(4), pages 637-655, December.
  32. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
  33. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
  34. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  35. Sylviane Guillaumont Jeanneney & Ping Hua, 2004. "Why Do More Open Chinese Provinces Have Bigger Governments?," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 525-542, 08.
  36. Haishun Sun & Phillip Hone & Hristos Doucouliago, 1999. "Economic openness and technical efficiency: A case study of Chinese manufacturing industries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(3), pages 615-636, November.
  37. Yue, Changjun & Hua, Ping, 2002. "Does comparative advantage explains export patterns in China?," China Economic Review, Elsevier, vol. 13(2-3), pages 276-296.
  38. Liu, Zhiqiang, 2008. "Foreign direct investment and technology spillovers: Theory and evidence," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 176-193, February.
  39. Danny Leung & Terence Yuen, 2010. "Do exchange rates affect the capital-labour ratio? Panel evidence from Canadian manufacturing industries," Applied Economics, Taylor & Francis Journals, vol. 42(20), pages 2519-2535.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:22:y:2011:i:4:p:628-645. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.