GLOBALIZATION, TRADE, AND WAGES: WHAT DOES HISTORY TELL US ABOUT CHINA?

Authors

  • KRIS JAMES MITCHENER,

    Corresponding author
    1. Santa Clara University, U.S.A.
    2. University of Warwick, U.K.
    • Please address correspondence to: Kris James Mitchener, Department of Economics, University of Warwick, Coventry, CV4 7AL, U.K. Phone: +44-24-7615-0045. E-mail: k.j.mitchener@warwick.ac.uk.

    Search for more papers by this author
  • SE YAN

    1. CAGE, NBER, Peking University, China
    Search for more papers by this author
    • We thank John Brown, Carolyn Evans, John Ifcher, Wolfgang Keller, Naomi Lamoreaux, Kevin O'Rourke, Larry Qiu, Alan Taylor, and Bin Xu as well as seminar and conference participants at UC Santa Cruz, Carlos III, IMT Lucca, and the ASSA and CNEH annual meetings for helpful comments and suggestions. Mitchener acknowledges the financial support of the Global Fellows Program, International Institute, UCLA and the Hoover Institution, Stanford University. Yan acknowledges the financial support of China National Social Science Foundation (Grant 09CJL009).


Abstract

Newly assembled data show that, as China opened up to global trade during the early 20th century, its exports became more unskilled-intensive and its imports more skill-intensive. Difference-in-differences estimates show that World War I dramatically increased Chinese exports, raising the relative demand for the unskilled workers producing them. When the war ended, trade costs declined and China's terms of trade increased, further stimulating exports. A simulation of a dynamic general equilibrium model demonstrates that the effects of the war on China's terms of trade produces a decline in the skill premium similar to what China experienced in the 1920s.

Ancillary