Rising wages and the value-added in exports: empirical research based on emerging economies

CUI Riming1 ZHANG Yulan1

(1.School of Economics, Liaoning University)

【Abstract】In recent years, population problems such as low fertility and aging have led to a shortage of labor resources, and labor costs in many industrialized countries have continued to rise. Emerging economies export a large number of labor-intensive products, which promotes rapid economic growth. Will they face the same problem? Based on the gravity model, this paper empirically studied the impact of rising wages on the value-added in exports of emerging economies. The study shows that rising wages do not hinder the value-added in exports of emerging economies, but instead promote exports, mainly due to the increase in labor productivity; under the combined effect of wages and labor productivity, emerging economies can still maintain labor cost advantages; in view, the rising wages of all types of skilled workers will promote value-added in exports, the rising wages of high-skilled workers will promote most the growth of value-added in exports, and the promotion of low-skilled workers will be the least. Finally, it predicts the trade potential of value-added in exports in emerging economies, mostly being huge trade potential and potential regeneration. It is proposed to expand trade cooperation with developed countries and maintain labor cost advantages from the perspective of labor quantity and quality.

【Keywords】 rising wages; labor productivity; value-added in exports; emerging economies;

【DOI】

【Funds】 The National Social Science Fund of China (15ZDA056) Research Topic of the Asia Research Center of Liaoning University (Y201602)

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(Translated by CHEN Wen)

    Footnote

    [1]. ① This database follows the accounting framework of Wang et al. (2013) in computing value-added in exports. [^Back]

    [2]. ① Wage rates can be obtained by dividing labor compensation by the number of employees provided in the WIOD database. Labor productivity can be derived as the real output divided by the number of employees. Following the equation for calculating unit labor cost of Cai (2009), Du (2009) and Wei and Guo (2013), that is, the observations for lnpad can be obtained for emerging economies. [^Back]

    [3]. ① Developed economies are defined according to the emerging economies, including Australia, Canada, Germany, France, Japan, Italy, the UK and the US. [^Back]

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This Article

ISSN:1002-4670

CN: 11-1692/F

Vol , No. 09, Pages 40-53

September 2019

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Article Outline

Abstract

  • Introduction
  • 1 Literature review
  • 2 Theoretical analysis and stylized facts
  • 3 Econometric model and data description
  • 4 Empirical estimation
  • 5 Potentials of value-added in exports and policy recommendation
  • Footnote

    References