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Trade Openness, Economic Growth and the Vicissitude of Labor-intensive Industries: The Case of China

Author

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  • Ying Ma

    (Center for Economic Development Research (CEDR), Wuhan University, P.R. China)

  • Jing Li

    (Economics School, Anhui University, P.R. China)

  • Guansheng Yu

    (Wenzhou University, P.R. China)

  • Dongyang Yuan

    (Shenzhen Branch of the People’s Bank of China, P.R. China)

Abstract

In this paper, we use China’s 1986-2008 data to make an empirical analysis on the interrelationship between trade openness, economic growth and the structural change of labor-intensive industries by using simultaneous equation models and a VAR model. Our empirical study leads to the three conclusions. First, trade openness has accelerated economic growth, though with some negative impact on the development of labor-intensive industries; Second, economic growth has had a positive effect on trade openness, but again negatively impacted the development of labor-intensive industries. Third, the expansion of labor-intensive industries has had negative effects on both trade openness and economic growth. Methodologically we rely on the transformation theory of industrial structure as an analytical framework to empirically study these three paradoxical outcomes. We introduce the three variables: trade openness, economic growth and the change of labor-intensive industries, as dependent as well as independent variables into our empirical models. And then we use technological progress, the share of secondary industries to GDP, total employment and investment ratio as control variables in order to test the robustness of the empirical results. In addition to explaining the factors responsible for changes in labor-intensive export industries we also provide two policy implications: First, labor-intensive industries should be scaled down to improve the efficiency of resources allocation. Second, China should timely transform its industrial structure of the export sectors from the one that is dominated by labor-intensive industries to the one that is dominated by capital (technology)-intensive industries so as to induce the export sectors to move in the direction favorable to the transformation of China’s present outward pattern of economic development.

Suggested Citation

  • Ying Ma & Jing Li & Guansheng Yu & Dongyang Yuan, 2014. "Trade Openness, Economic Growth and the Vicissitude of Labor-intensive Industries: The Case of China," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 43(1), pages 7-31, September.
    • Handle: RePEc:vrs:ijomae:v:43:y:2014:i:1:p:7-31:n:1
    DOI: 10.1515/ijme-2015-0001
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    References listed on IDEAS

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    Cited by:

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    2. Afesorgbor, Sylvanus Kwaku & Demena, Binyam A., 2019. "The Effect of Trade on the Environment: Evidence from Meta-analysis," 2019 Annual Meeting, July 21-23, Atlanta, Georgia 291225, Agricultural and Applied Economics Association.
    3. Akinbode Damilola Olatunde & Ogunleye, Edward Oladipo, 2022. "Determinants of Environmental Pollution in Sub-Sahara Africa," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(3), pages 631-642, March.
    4. Senzele, Joseph, 2022. "Croissance économique et dégradation de l’environnement en Côte d’Ivoire : application du modèle stirpat [Economic growth and environmental degradation in Cote d'ivoire : stirpat model implementati," MPRA Paper 114754, University Library of Munich, Germany, revised 24 Sep 2022.
    5. Ma, Yong & Chen, Diandian, 2020. "Openness, rural-urban inequality, and happiness in China," Economic Systems, Elsevier, vol. 44(4).

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