Trade pattern’s transition and wage gap: evidence from China’s manufacturing

Abstract

Since 1990s, the main trade pattern in China’s manufacturing has changed from inter-industry trade to intra-industry trade along with a big expansion of wage gap between 27 sub-manufacturing in China. This paper shows how trade pattern shifting influences the wage gap by exploring the theory model of Feenstra and Hanson. The empirical analysis gets two major conclusions: (1) wherever the sub-manufacturing is mainly engaged in inter-industry trade or intra-industry trade, exports increase the wage gap while imports narrow it; (2) Commodity price fluctuation is the main mechanism through which trade patterns influence the wage gap in China which is indicated by the Stolper–Samuelson theorem.