Management Review ›› 2021, Vol. 33 ›› Issue (9): 3-15.

• Economic and Financial Management •     Next Articles

The Effect of Trade Policies on Industry-level Wage Changes in China from Tariffs and Exchange Rates Perspectives

Pan Wenqing, Chen Jiaying   

  1. School of Economics and Management, Tsinghua University, Beijing 100084
  • Received:2018-07-16 Online:2021-09-28 Published:2021-10-09

Abstract: This paper mainly examines the effects of changes in China's tariffs after the accession to the World Trade Organization at the end of 2001 and in exchange rates after the reform of the RMB exchange rate in 2006 on industry-level wages. Based on the FKV model of Fujita et al. and by introducing trade cost and industry aggregation factors, this paper empirically analyzes the impact of trade policy on China's industry-level wages distribution by adopting panel data of 19 industries in China's 31 provinces from 2003 to 2016. The study finds that the reduction in tariffs after China's accession to the WTO increases China's industry-level wages and the appreciation of the RMB real exchange rate after the reform of the exchange rate pricing mechanism decreases China's industry-level wages. The interactions of tariffs and exchange rates with the level of industrial agglomeration do not have a significant impact on the industry-level wages, but the effects of changes in China's tariffs and exchange rates on the industry-level wages are related to two types of industrial characteristics, i.e., monopoly and high-technology, and are related to three types of regional characteristics, i.e., the level of regional education, infrastructure construction and trade openness.

Key words: tariffs, exchange rate, industrial aggregation, wage level, wage difference