Rising Wages: Has China Lost Its Global Labor Advantage?

We document dramatic rising wages in China for the period 1978-2007 based on multiple sources of aggregate statistics. Although real wages increased seven-fold during the period, growth was uneven across ownership types, industries and regions. Since the late 1990s, the wages of state-owned enterprises have increased rapidly and wage disparities between skill-intensive and labor-intensive industries have widened. Comparisons of international data show that China's manufacturing wage has already converged to that of Asian emerging markets, but China still enjoys enormous labor cost advantages over its neighboring developed economies. Our analysis suggests that China's wage growth will stabilize to a moderate pace in the near future.wage growth, aggregate statistics, China, international comparison

Learning and the Value of Relationships in International Trade

How valuable are long-term supplier relationships? To address this question, this paper explores relationships between U.S. importers and their suppliers abroad. We first establish several facts: almost half of U.S. imports are in relationships three years or older, relationship survival and traded quantity increase as a relationship ages, and long-term relationships were more resilient in the 2008/9 financial crisis. Based on these findings, we present a model of importer learning and calibrate it using our data. We estimate large differences in the value of relationships across countries. Counterfactuals show that relationships are central to trade flows following external shocks

Three Essays on Relationships in International Trade.

In a time of greatly improved long-distance transportation technology, low tariffs, and continued strengthening of economic links between countries, scholars of international trade have turned to their attention to factors influencing companies that take part in international business. This dissertation consists of three studies that explore how relationships these firms have with other firms around the world influence trade flows and prices, as well as company-level employment, wages, output, and which products to buy. The first chapter, ``It's Not You, It's Me: Breakups in U.S.-China Trade Relationships" uses confidential U.S. Customs data on U.S. importers and their Chinese exporters to investigate the frictions from changing exporting partners. High costs from switching partners can affect the efficiency of buyer-supplier matches by impeding the movement of importers from high to lower cost exporters. I test the significance of this channel using data which identifies firms on both sides of an international trade relationships. I propose and structurally estimate a dynamic discrete choice model of exporter choice. Halving switching improves match efficiency and leads to a 12.5% decrease in the U.S.-China Import Price Index. The second chapter, ``Gains from Offshoring? Evidence from U.S. Microdata", joint with Jooyoun Park and Jagadeesh Sivadasan, assesses how offshoring impacts domestic firm-level aggregate employment, output, wages and productivity. Offshoring firms are on average larger and more productive compared to non-offshorers. However, we find that offshorers suffer from a large decline in employment and output relative to their peers even in the long run. The third chapter, ``Learning and the Value of Relationships in International Trade", joint with Tim Schmidt-Eisenlohr, explores the value to firms of being in relationships. Over half of the time importers adjust their source for a product, it is to a ``familiar" exporter, meaning either an exporter used for that same product previously, or to one used for separate product purchases. 43% of new product purchases also come from familiar exporters. These results point to the importance of reputation and information asymmetries. We explore this channel through a model of supplier learning, creating estimates for the extent to which relationships influence trade flows.PhDEconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/108913/1/monarchr_1.pd

Rising Wages: Has China Lost Its Global Labor Advantage?

We document dramatic rising wages in China for the period 1978–2007 based on multiple sources of aggregate statistics. Although real wages increased seven-fold during the period, growth was uneven across ownership types, industries and regions. In the last decade, the wages of state-owned enterprises increased rapidly and wage disparities between skill-intensive and labour-intensive industries widened. Comparisons of international data show that China’s manufacturing wage has already converged to that of Asian emerging markets, but China still enjoys enormous labour cost advantages over its neighbouring developed economies. Our analysis suggests that China’s wage growth will stabilize to a moderate pace in the near future.

Structural change and global trade

Services, which are less traded than goods, rose from 58 percent of world expenditure in 1970 to 79 percent in 2015. Using a Ricardian trade model incorporating endogenous structural change, we quantify how this substantial shift in consumption has affected trade. Without structural change, we find that the world trade to GDP ratio would be 15 percentage points higher by 2015, about half the boost delivered from declining trade costs. In addition, this structural change has lowered the global welfare gains from trade integration by almost 40 percent over the past four decades. Absent further reductions in trade costs, ongoing structural change implies that world trade as a share of GDP would eventually decline. Going forward, higher income countries gain relatively more from reducing services trade costs than from reducing goods trade costs