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Export Destination, Skill Utilization and Skill Premium in Chinese Manufacturing sector

Author

Listed:
  • Khan, Bilal M.
  • Xia, Junjie

Abstract

This paper analyzes the link between export destination, skill utilization and skill premium. We develop the mechanism behind these links: the difference in quality valuation of the product across exporting destinations and the distribution of level of skill among the skilled workers in the labor market. Theory suggest that the consumers in the high income countries value the quality of the same product more than their counterparts in middle or low income countries. To produce a higher quality product, a firm needs not only more skilled workers but also higher quality skilled workers. To attract and keep the higher quality worker, firm needs to incentivize her by providing higher wage as compared to the firms that would be exporting to middle or low income countries. We test this theory using cross-section of more than 160,000 single product Chinese Manufacturing firms survey data, of which nearly 22,000 are exporting to more than 200 countries across the world. We find that firms exporting to high income countries pay higher average wages, hire more skilled workers, defined by education level, and pay higher skill premium as compared to firms exporting to middle or low income countries or selling domestically. Similar to the recent literature, we also didn’t find the impact of exporting per se on the proportion of skilled workers or the skill premium in the firm.

Suggested Citation

  • Khan, Bilal M. & Xia, Junjie, 2016. "Export Destination, Skill Utilization and Skill Premium in Chinese Manufacturing sector," MPRA Paper 72408, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:72408
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    File URL: https://mpra.ub.uni-muenchen.de/72408/1/MPRA_paper_72408.pdf
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    References listed on IDEAS

    as
    1. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 489-530.
    2. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    3. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 903-947.
    4. Paula Bustos, 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms," American Economic Review, American Economic Association, vol. 101(1), pages 304-340, February.
    5. Brambilla, Irene & Porto, Guido G., 2016. "High-income export destinations, quality and wages," Journal of International Economics, Elsevier, vol. 98(C), pages 21-35.
    6. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    7. Irene Brambilla & Daniel Lederman & Guido Porto, 2012. "Exports, Export Destinations, and Skills," American Economic Review, American Economic Association, vol. 102(7), pages 3406-3438, December.
    8. Kiminori Matsuyama, 2007. "Beyond Icebergs: Towards a Theory of Biased Globalization," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 237-253.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    China; Manufacturing firms; Exports; Export destination; labor productivity; wages; Firm heterogeneity; Trade;

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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