Presented and defended by: Wang Bin
Published by Trendline Economics, in conjunction with Université Paris 1 – Panthéon Sorbonne
Advising Professor Sandra Poncet, Paris School of Economics & Université Paris 1 - Panthéon Sorbonne
Abstract
International trade is a very important part of China’s economy. And one of the most important issues is the trade liberalization on labor productivity. This paper is based on the theory of Melitz and Ottaviano (2008). We revise the empirical model developed by Chen et al. (2009) so that it will be more consistent with the theoretical model. We separate labor productivity into two dimensions: extensive margin labor productivity and intensive margin labor productivity. For the theoretical model, which takes intensive labor productivity more heavily into consideration, we take value added per unit per worker as the input labor productivity in the empirical analysis. The model is in the sector level. All the sector level databases are from CEPII and GDP data is from World Bank. We take China as the domestic country and 180 countries are included in the sample from 1996 to 2006. We make pairwise of China – foreign country – sector to estimate the short run effect by using OLS, fixed effect model and first order difference model, and to estimate the long run effect by using error correction model.
The results show that domestic trade liberalization has a positive effect on labor productivity, while foreign trade liberalization has a negative effect on labor productivity.
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