The impact of trade on the elasticity of labor demand—Nonlinear analysis based on the perspective of human capital

Abstract

Using the import and export trade data of 29 provinces and cities in China from 1997 to 2017, this paper studies the impact of trade on China’s labor demand elasticity, and whether the impact will be affected by the level of domestic human capital. The results show that: import is conducive to improving the labor demand elasticity, and export is conducive to reducing the labor demand elasticity. Moreover, with the improvement of domestic human capital level, the weakening effect of export on the labor demand elasticity is strengthened, and the improving effect of import on the labor demand elasticity is weakened. The reason is that the improvement of the level of human capital can reduce the demand elasticity of domestic and foreign consumers for domestic products by improving the cost performance of products, and can also reduce the factor substitution elasticity of labor force. Therefore, the improvement effect of import on the demand elasticity of labor force is weakened, and the weakening effect of export on the demand elasticity of labor force is strengthened. It can be seen that the improvement of domestic human capital level is conducive to the labor force to deal with the employment security problem in the trade liberalization.