Abstract
This paper studies the impact of labor mobility on comparative advantage of China’s manufacturing industries. Labor mobility refers to labor movement across regions and industries. Comparative advantage refers to better product performance in international trade in aspect of quality and price, and it can be reflected directly in export values. Industries with comparative advantage have more benefits in international trade. Firstly, this paper reviews literatures that focus on impact of labor market on comparative advantage. Secondly, this paper illustrates the mechanism of how labor mobility has impact on comparative advantage. Thirdly, the empirical analysis tests this mechanism through mixed OLS (Ordinary Least Square) regression and one-way FEM (Fixed Effects Model), using panel data of China subdivision export. The results of empirical analysis support the mechanism. Lastly, this paper reaches a conclusion that higher labor mobility has positive impact on comparative advantage in highly volatile industries, due to the fact those industries in higher labor mobility regions have stronger ability and lower cost to adjust production scale when confronted with economic shocks.
Highlights
Comparative advantage refers to advantages that exporters have in aspect of product quality and product price compared with others
In regions with higher labor mobility, the matching efficiency between labor force and manufacturers is higher and the matching cost is lower in labor market
It indicates that the combined effect of labor mobility and industry volatility has significantly positive impact on comparative advantage
Summary
Comparative advantage refers to advantages that exporters have in aspect of product quality and product price compared with others. Export value of a region or an industry can reflect its comparative advantage. After the reform and opening-up, attracted by rapid economic growth in coastal regions, labor force in China has become massively mobile across regions. Massive labor movement across regions continues to influence different aspects of economic development of China. The labor movement towards coastal regions brought down labor cost in manufacturing industries and enormously enhanced export trade. This phenomenon implies a possibility that labor mobility can have impact on comparative advantage of manufacturing industries. The purpose of this paper is to study the positive impact of labor mobility on comparative advantage empirically
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