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Globalization, Trade, And Wages: What Does History Tell Us About China?

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  • KRIS JAMES MITCHENER
  • SE YAN

Abstract

Newly assembled data show that, as China opened up to global trade during the early 20th century, its exports became more unskilled‐intensive and its imports more skill‐intensive. Difference‐in‐differences estimates show that World War I dramatically increased Chinese exports, raising the relative demand for the unskilled workers producing them. When the war ended, trade costs declined and China's terms of trade increased, further stimulating exports. A simulation of a dynamic general equilibrium model demonstrates that the effects of the war on China's terms of trade produces a decline in the skill premium similar to what China experienced in the 1920s.

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  • Kris James Mitchener & Se Yan, 2014. "Globalization, Trade, And Wages: What Does History Tell Us About China?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 131-168, February.
  • Handle: RePEc:wly:iecrev:v:55:y:2014:i:1:p:131-168
    DOI: 10.1111/iere.12044
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