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Trade, Foreign Direct Investment and Wage Inequality in China: A Heterogeneous Firms Approach

  • Theresa M. Greaney

    ()

    (Department of Economics University of Hawaii)

  • Yao Li

    ()

    (School of Management and Economics University of Electronic Science and Technology of China)

We apply insights from the heterogeneous firms’ literature to an empirical investigation of wage inequality in China, focusing on the potential influences of FDI and trade. Using firm-level data, we examine intra-sectoral wage inequality in a major industrial region with firms identified according to five firm ownership types and three exporter status types. We find large ownership-type wage premiums separate from other observable influences on wages, including a firm’s exporter status. Our results indicate that ownership type matters more than exporter status as a determinant in explaining intra-sectoral wage inequality in China’s Yangtze River Delta. We also find evidence of asymmetric wage effects of firm type by exporter status and by other wage determinants.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_13-6.pdf
File Function: First version, 2013
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 201306.

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Length: 36 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:hai:wpaper:201306
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  1. Chen, Zhihong & Ge, Ying & Lai, Huiwen, 2011. "Foreign Direct Investment and Wage Inequality: Evidence from China," World Development, Elsevier, vol. 39(8), pages 1322-1332, August.
  2. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2012. "Trade and Inequality: From Theory to Estimation," NBER Working Papers 17991, National Bureau of Economic Research, Inc.
  3. Heyman, Fredrik & Sjoholm, Fredrik & Tingvall, Patrik Gustavsson, 2007. "Is there really a foreign ownership wage premium? Evidence from matched employer-employee data," Journal of International Economics, Elsevier, vol. 73(2), pages 355-376, November.
  4. Galina Hale & Cheryl Long, 2011. "Did Foreign Direct Investment Put an Upward Pressure on Wages in China?," IMF Economic Review, Palgrave Macmillan, vol. 59(3), pages 404-430, August.
  5. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  6. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships And Informal Credit In Vietnam," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1285-1320, November.
  7. Christopher Candelaria & Mary Daly & Galina Hale, 2009. "Beyond Kuznets: persistent regional inequality in China," Working Paper Series 2009-07, Federal Reserve Bank of San Francisco.
  8. Bernard, A.B. & Jensen, J.B., 1994. "Exporters, Skill Upgrading, and the Wage Gap," Working papers 94-30, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Jr-Tsung Huang, 2004. "Spillovers from Taiwan, Hong Kong, and Macau Investment and from Other Foreign Investment in Chinese Industries," Contemporary Economic Policy, Western Economic Association International, vol. 22(1), pages 13-25, 01.
  10. Fabrice Defever & Alejandro Riaño, 2012. "China's pure exporter subsidies," LSE Research Online Documents on Economics 48929, London School of Economics and Political Science, LSE Library.
  11. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  12. Lipsey, Robert E. & Sjoholm, Fredrik, 2004. "Foreign direct investment, education and wages in Indonesian manufacturing," Journal of Development Economics, Elsevier, vol. 73(1), pages 415-422, February.
  13. Han, Jun & Liu, Runjuan & Zhang, Junsen, 2012. "Globalization and wage inequality: Evidence from urban China," Journal of International Economics, Elsevier, vol. 87(2), pages 288-297.
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