The Effects of the Chinese Imports on Brazilian Manufacturing Workers

Lourenço S Paz,Kul Prasad Kapri

doi:10.3390/economies7030076

Abstract

This study examines the impacts of imports from China and from the Rest of the World (ROW) on the wages of Brazilian manufacturing workers during 2000–2012. In this period, import penetration in Brazil grew by 25 percent, and the Chinese share of it increased from 3 to 20 percent. Using household survey data that encompass both formal and informal workers, we find that imports from China and from the ROW had different effects on manufacturing skilled and unskilled workers’ wages. Both the skilled and unskilled workers were negatively affected by an increase in the Chinese import penetration of intermediate inputs. For skilled workers, the ROW import penetration effect was negative for labor-intensive industries and positive for the other industries, while the Chinese import penetration had a positive effect on skilled workers’ wages. For the unskilled workers, we find that those in unskilled-labor intensive industries experienced positive impacts from both China and ROW import penetrations, whereas larger import penetrations reduced the wages for unskilled workers in the other industries.

Highlights

The effects of globalization on workers’ wages have attracted substantial attention of both researchers and policymakers in recent decades (Freeman 1995)
Our contribution differs from the extant literature because we empirically examine how the wages of Brazilian manufacturing workers were affected by the changes in the Chinese and in the Rest of the World (ROW) industry-level import penetrations, and whether these effects differed according to skill level of workers, labor intensity of the industry, and state-level characteristics
We found that the wages of skilled and unskilled workers were differently affected by trade exposure

Summary

Introduction

The effects of globalization on workers’ wages have attracted substantial attention of both researchers and policymakers in recent decades (Freeman 1995). In 2000, China accounted for four percent of world exports, and later for 11.42 percent of world exports in 2012 This large and fast expansion in world trade participation of the largest unskilled-labor abundant nation has been called China shock by many researchers. Not unexpectedly, this raises the question of how the China shock impacted the other developing economies and their manufacturing workers (Moreira 2007).

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Conclusion