Impact of Labor Mobility on Comparative Advantage of Manufacturing Industries in China: Empirical Analysis

Transcription

1 Intenational Jounal of Buine and Economic Reeach 2018; 7(2): doi: /j.ijbe ISSN: (Pint); ISSN: X (Online) Impact of Labo Mobility on Compaative Advantage of Manufactuing Indutie in China: Empiical Analyi Shuang Zhao School of Buine, Nanjing Nomal Univeity, Nanjing, China adde: To cite thi aticle: Shuang Zhao. Impact of Labo Mobility on Compaative Advantage of Manufactuing Indutie in China: Empiical Analyi. Intenational Jounal of Buine and Economic Reeach. Vol. 7, No. 2, 2018, pp doi: /j.ijbe Received: Mach 7, 2018; Accepted: Mach 28, 2018; Publihed: Apil 28, 2018 Abtact: Thi pape tudie the impact of labo mobility on compaative advantage of China manufactuing indutie. Labo mobility efe to labo movement aco egion and indutie. Compaative advantage efe to bette poduct pefomance in intenational tade in apect of quality and pice, and it can be eflected diectly in expot value. Indutie with compaative advantage have moe benefit in intenational tade. Fitly, thi pape eview liteatue that focu on impact of labo maket on compaative advantage. Secondly, thi pape illutate the mechanim of how labo mobility ha impact on compaative advantage. Thidly, the empiical analyi tet thi mechanim though mixed OLS (Odinay Leat Squae) egeion and one-way FEM (Fixed Effect Model), uing panel data of China ubdiviion expot. The eult of empiical analyi uppot the mechanim. Latly, thi pape eache a concluion that highe labo mobility ha poitive impact on compaative advantage in highly volatile indutie, due to the fact thoe indutie in highe labo mobility egion have tonge ability and lowe cot to adjut poduction cale when confonted with economic hock. Keywod: Labo Mobility, Compaative Advantage, Induty Volatility 1. Intoduction Compaative advantage efe to advantage that expote have in apect of poduct quality and poduct pice compaed with othe. Geneally, expot value of a egion o an induty can eflect it compaative advantage. Afte the efom and opening-up, attacted by apid economic gowth in coatal egion, labo foce in China ha become maively mobile aco egion. Maive labo movement aco egion continue to influence diffeent apect of economic development of China. The labo movement towad coatal egion bought down labo cot in manufactuing indutie and enomouly enhanced expot tade. Thi phenomenon implie a poibility that labo mobility can have impact on compaative advantage of manufactuing indutie. The pupoe of thi pape i to tudy the poitive impact of labo mobility on compaative advantage empiically. 2. Liteatue Review Labo maket can have influence on compaative advantage of a county. Reeache tudied the impact of legal ytem in labo maket on intenational tade [1]. Afte adding a vaiable that epeent legal ytem into the Heckche-Ohlin model in empiical analyi, the eult how that implementation of the minimum wage ytem can enhance compaative advantage of labo-intenive indutie. Reeache tudied the elationhip between legal ytem in labo maket and intenational tade in China and eached imila concluion: the implementation of Labo Contact Law can influence employment behavio of expote [2]. Beide legal ytem, flexibility of labo maket intitution alo ha impact on compaative advantage. The moe flexible the labo maket intitution ae in a county, the moe advantageou the county i in volatile indutie [3]. Thee liteatue how the elationhip between labo maket and compaative advantage. In liteatue that focu on elationhip between labo maket and intenational tade [4-15], labo mobility ha not eceived adequate attention. Thi pape intend to appoach thi quetion though empiical analyi. Thi pape illutate the mechanim of how labo mobility ha impact on compaative advantage. And tet thi mechanim though empiical analyi.

2 26 Shuang Zhao: Impact of Labo Mobility on Compaative Advantage of Manufactuing Indutie in China: Empiical Analyi 3. Illutation of the Mechanim 3.1. The Concept of Labo Mobility Labo mobility efe to labo movement aco egion and indutie, and thi pape focue on egional movement of labo. Accoding to Law of Migation [16], the mot fundamental dive of labo mobility i economic facto. And many facto can influence the level of labo mobility a below Quantity of Labo Movement The geate the quantity of labo movement i, the highe the level of labo mobility the egion ha. And the quantity i poitively elated to the gap of economic development between in-flow and out-flow egion. The geate the gap i, the geate the quantity of labo movement i Cot of Labo Movement The highe the cot of labo movement i, the lowe the level of labo mobility the egion ha. Fom the pepective of manufactue, the cot of labo movement include matching cot, hiing cot, and fiing cot in labo maket. Fom the pepective of labo foce, the cot of labo movement include cot of eaching fo a new job, cot of egaining pofeional kill, and cot of immigation aco egion. In China, the Houehold Regitation Sytem i a majo obtacle fo labo movement, becaue it inceae the cot of labo movement, and deceae the labo mobility Capability of Labo The tonge the capability that labo ha in ode to move aco egion, the highe the level of labo mobility the egion ha. The capability of labo include geneal kill (ability to each fo new job, communicating ability, inteviewing kill, etc.), pofeional kill, and education level. Woke with tonge capabilitie will encounte le obtacle and moe oppotunitie in labo movement The Concept of Compaative Advantage The concept of compaative advantage wa fit bought up in 1817 [17]. Back in that time, compaative advantage meant that one county wa able to poduce cetain good at lowe cot than othe countie. By now, the concept of compaative advantage ha boken though the old concept, and mean that poduce, indutie, and countie ae able to manufactue good of bette quality, lowe cot, and moe uitable to emeging demand in wold economy Mechanim Fitly, manufactuing indutie have to face economic and non-economic hock that exit in dometic and foeign economie, including endogenou economic cycle, extenal economic hock, and woldwide accidental event. Thee hock contitute the developing envionment fo manufactue and have impact on the demand fo quantity, quality and othe apect of poduct. Due to diffeent chaacteitic of indutie, thee hock will lead to diffeent volatility level among indutie. Indutie that ae moe enitive to hock will be moe volatile compaed to le enitive indutie. Secondly, diffeent egion have diffeent labo mobility. In egion with highe labo mobility, the matching efficiency between labo foce and manufactue i highe and the matching cot i lowe in labo maket. Thidly, when hock come, two baic change of demand emege that manufactue have to deal with quickly to emain competitive. The fit change i demand of quantity, the econd i demand of quality. Fo indutie located in highe labo mobility egion, they ae able to adjut thei employment tategie quicke, due to highe matching efficiency. When thee emege a apid inceae o deceae in demand quantity, thee indutie can adjut employment tategie to change the numbe of thei labo foce in ode to adjut the output quickly; When thee emege equiement change in poduct quality, thee indutie can alo adjut employment tategie to change the kill level of thei labo foce to deal with it quickly. Indutie that can quickly adjut employment tategie have lowe cot in the face of hock. A China become moe cloely elated to GVC (Global Value Chain), indutie in China ae now facing a highe fequency of extenal and endogenou hock. Indutie in highe labo mobility egion have lowe adjuting cot, theefoe have lowe poducing cot. Lowe poducing cot i a key deteminant of compaative advantage. That i, highe labo mobility enhance compaative advantage, and thi i moe ignificant fo highly volatile indutie. In hot, fo moe volatile indutie, indutie in highe labo mobility egion have compaative advantage. 4. Empiical Analyi 4.1. Data Souce Thi pape ue panel data of 30 povince and citie in China except Tibet (data of Tibet i eiouly miing) fom 2013 to Accoding to the Induty Claification of National Economy (2011) in China, manufactuing indutie ae claified into 29 ubdiviion. Raw data ae fom China Indutial Statitic Yeabook, China Labo Statitic Yeabook, the 6th National Cenu Repot, and National Bueau of Statitic of China Baeline Model Thi pape adopt the ame baeline model of a tudy on the impact of intitutional envionment on compaative advantage [18]. The tudy added inteaction between intitutional envionment and enitivity to intitutional envionment of diffeent poduct into baeline model. Accoding to the mechanim above, thi pape take labo mobility a majo vaiable, and bing it into the model in the fom of inteaction with induty volatility. The model i deigned to tet whethe labo mobility have an impact on compaative advantage. The baeline model i:

3 Intenational Jounal of Buine and Economic Reeach 2018; 7(2): E = α β ( Vol Mob ) β Contol ε (1) vm n n E tand fo expot of induty in egion, and it meaue compaative advantage. α tand fo egional fixed effect. Vol tand fo induty volatility. Mob tand fo labo mobility in egion. Contol tand fo a matix of contol vaiable that affect the compaative advantage. ε tand fo andom ditubance tem Contol Vaiable Contol vaiable ae facto beide majo vaiable that alo have impact on compaative advantage in dometic economy, thi pape elect following facto a contol vaiable: (1) Facto endowment. Accoding to Heckche-Olin theoy, facto endowment of a county (egion) ha a ignificant impact on compaative advantage. Thi pape add phyical eouce endowment, natual eouce endowment, and human eouce endowment a contol vaiable. (2) Economic development. Developed egion ae geneally moe advanced in technology and pobably occupy compaative advantage. Theefoe, thi pape add economic development into contol vaiable Meauement Compaative Advantage Thi pape adopt expot value a the meauement of compaative advantage. Take the logaithm of expot volume and denote it a loge Labo Mobility Thi pape ue "the numbe of eident living in thei own townhip, town and teet, the numbe of people living in othe townhip, town and teet, and eident leaving the egiteed eidence fo moe than half a yea" a the meauement of migant population, denoted a MP. The total population of a egion i denoted a TP. And labo mobility of a egion i: n Mob = MP / TP (2) Induty Volatility Thi pape ue ale fluctuation of indutie a meauement of induty volatility. Fit calculate the abolute value of tandad deviation of inceae o deceae, then aveage the abolute value among yea and denote it a Vol Phyical Reouce Endowment Thi pape ue phyical capital tock pe woke a the meauement of phyical eouce endowment. Aveage the phyical capital tock pe woke among yea, then take logaithm and denote it a logk Human Reouce Endowment Thi pape ue weighted aveage education level a meauement of human eouce endowment in diffeent indutie and egion. Take logaithm of it and denote it a logs, logs Natual Reouce Endowment Thi pape ue output value pe capita of mining induty of a egion a the meauement of natual eouce endowment. Take logaithm and denote it a logk Economic Development GDP pe capita i ued a meauement of economic development of diffeent indutie and egion. Fit aveage GDP pe capita among yea to eliminate time effect, then take logaithm, and denote it a loggdp, loggdp Empiical Tet Mixed OLS Regeion The baic model including all contol vaiable and inteaction item i: loge = β0 β ( Vol Mob ) β (logk ) vm km Mob β (logk log ) (log log ) kk K β S S β (loggdp log ) (log log ) g GDP β GDP gk K β (loggdp log ) (log log ) g S β GDP gk K β (loggdp logs ) ε g Fit, tet the baic model though mixed OLS egeion to examine the model peliminaily. Reult ae howed in Table 1. Reult (1) i the model with no contol vaiable, the explaining vaiable only contain the inteaction between labo mobility and induty volatility. The eult how the explanatoy ability of the model i weak. Theefoe, it i neceay to add contol vaiable, and check whethe the contol vaiable hould be included. Reult (2) - (9) ae model with diffeent contol vaiable. Reult how that 2 when contol vaiable ae added, the goodne of fitne ( R ) doe not deceae, and the oveall tend i upwad. The contol vaiable can tengthen the explanatoy ability of the model. Reult (9) i the model including all contol vaiable and inteaction item. Mot vaiable pa ignificance tet at 1% level, and the eult peliminaily explain the impact of explanatoy vaiable on compaative advantage One-Way FEM Haumann tet how that panel data ha fixed effect. In thi ituation, uing OLS egeion will caue incoect and biaed eult. Theefoe, thi pape caie out one-way FEM egeion of the baic model to obtain accuate and unbiaed eult. Reult ae howed in Table 2. Thee ae fou vaiable that have no ignificant influence on compaative advantage. Afte deleting thee fou vaiable, the modified model become: loge = β0 β ( Vol Mob ) β (logk ) vm km Mob β (logk log ) (log log ) kk K β S S β (loggdp loggdp ) ε g The eult of modified model ae howed in Table 3. (3) (4)

4 28 Shuang Zhao: Impact of Labo Mobility on Compaative Advantage of Manufactuing Indutie in China: Empiical Analyi 5. Reult A can be een fom Table 3: (1)F value how that thee i ignificant individual effect in the panel data, and it i not appopiate to ue mixed OLS egeion. It i popiate to adopt the method of one-way FEM model. (2) Rho value how that all vaiation of compaative advantage ae elated to egional diffeence. (3) The coefficient of inteaction between labo mobility and induty volatility pae ignificance tet at 1% level. And the coefficient i poitive. It indicate that the combined effect of labo mobility and induty volatility ha ignificantly poitive impact on compaative advantage. (4) The coefficient of inteaction between labo mobility and phyical capital endowment pae ignificance tet at 1% level, and the coefficient i negative. It indicate that the combined effect of labo mobility and phyical eouce endowment ha ignificantly negative impact on compaative advantage. (5) The inteaction between phyical eouce endowment and natual eouce endowment doe not pa the ignificance level tet. It how that the impact of thi vaiable on compaative Table 1. Reult of mixed OLS egeion. advantage i not ignificant. (6) The inteaction of egional human eouce endowment and induty human eouce endowment i ignificant at 1% level, and the coefficient i poitive. It indicate that if othe vaiable emaining the ame, the highe the level of human eouce endowment i, the tonge the compaative advantage will be. (7) The inteaction of egional GDP pe capita and induty GDP pe capita i ignificant at 1% level. Contay to common ene, and the coefficient i negative. Thi how a negative impact of economic development on compaative advantage. The eaon i that in thi pape, 29 ubdiviion ae not claified into categoie of labo-intenive, capital-intenive, and knowledge-intenive indutie. In China, the expot of labo-intenive poduct i enomou and till occupie the majo popotion of expot. But in developed egion of China, capital-intenive and knowledge-intenive poduct ae majo expot poduct. A a eult, the total tade value of developed egion may be le in quantity than labo-intenive poduct of le developed egion. Thi ituation caue a evee elation of economic development and compaative advantage. Vaiable (1) (2) (3) (4) (5) (6) (7) (8) (9) Vol Mob 4.157*** 2.691*** 2.764*** 3.302*** 3.385*** 3.327*** 3.324*** 3.335*** 3.379*** logk Mob 0.645*** 0.742*** ** ** * * *** logk logk *** *** *** *** *** *** *** logs logs 4.122*** 3.554*** 3.384*** 3.144*** 3.144*** 3.087*** loggdp loggdp 0.323*** 0.337*** 0.351*** 0.351*** 0.318*** loggdp logk 0.255*** 0.566*** 0.561*** 1.507*** loggdp logs ** ** *** loggdp logk loggdp logs *** Contant 1.021*** 0.869*** 1.184*** *** *** *** *** *** Obevation R-quaed Note: *, **, *** epectively epeent the vaiable pae ignificance tet at level of 10%, 5%, 1%. Table 2. Reult of one-way FEM. Vaiable C. V. Std. eo t P> t Vol Mob logk Mob logk logk logs logs loggdp loggdp loggdp logk loggdp logs loggdp logk loggdp logs Contant Sigma u = Rho= Sigma e = R-Squae(within)= F (9, 831) = Pob > F = F (29, 831) = Pob > F = Table 3. Reult of modified one-way FEM. Vaiable C. V. Std. eo t P> t Vol Mob logk Mob logk logk logs logs loggdp loggdp

5 Intenational Jounal of Buine and Economic Reeach 2018; 7(2): Vaiable C. V. Std. eo t P> t Contant Sigma u = Rho= Sigma e = R-Squae(within)= F (5, 835) = Pob > F = F (29, 835) = Pob > F = Concluion Fitly, thi pape illutate the mechanim of how labo mobility ha impact on compaative advantage though inteaction with induty volatility. It i impotant fo volatile indutie to quickly hink o expand poduction cale. In egion with highe labo mobility, the matching efficiency i highe, and the matching cot i lowe in labo maket. Theefoe, indutie in thoe egion ae able to adjut to hock at lowe cot and then obtain compaative advantage. To tet thi mechanim empiically, thi pape adopt one-way FEM. Empiical eult uppot the mechanim in the thid pat and how that labo mobility ha poitive impact on compaative advantage. Secondly, eult how that inteaction of labo mobility and induty capital denity pae though the ignificance tet and ha negative impact on compaative advantage. Thi indicate that labo mobility alo ha impact on compaative advantage though induty capital eouce endowment. Among indutie with bette capital eouce, the impovement of labo mobility ha a negative impact on compaative advantage. A poible explanation i that in egion with high labo mobility, labo-intenive indutie ae able to take full advantage of the lowe matching cot in labo maket. Thi lead manufactue to invet moe in labo-intenive poduct and educe the invetment in capital-intenive poduct. Thi lead to low level R&D invetment in capital-intenive indutie in thee egion. In the long tem, capital-intenive indutie in thi egion will expeience a weakening of compaative advantage. Thidly, the impact of labo mobility on compaative advantage i diffeentiated, due to diffeent chaacteitic of egion and indutie. Fo diffeent egion, the mechanim of labo mobility i the ame, but the impact level i diffeent. Thi pape illutate the mechanim of labo mobility influencing compaative advantage and pove it though empiical tet. In China, a moe flexible houehold egitation ytem i needed to enhance labo mobility and ceate a moe convenient envionment fo expote to develop compaative advantage. Refeence [1] Leame E. Effot, Wage, and the Intenational Diviion of Labo [J]. Jounal of Political Economy, 1996, 107 (6), pp [2] Zhiming Zhang, Riming Cui, Peng Dai. Open Tade, "Labo Contact Law" Implementation and Employment behavio of China' Manufactuing Induty fom the Pepective of Value-added Tade [J] Intenational Tade iue, , pp [3] Cuñat A, Melitz M J. Volatility, Labo Maket Flexibility, and the Patten of Compaative Advantage [J]. Jounal of the Euopean Economic Aociation, 2012, 10 (2), pp [4] Saint-Paul, G. (1997): I Labo Rigidity Haming Euope Competitivene? The Effect of Job Potection on the Patten of Tade and Welfae, Euopean Economic Review, 41, pp [5] Belloc M. Do Labo Maket Intitution Affect Intenational Compaative Advantage? An Empiical Invetigation [J]. Depatment of Economic Univeity of Siena, [6] Helpman E. Labo Maket Rigiditie, Tade and Unemployment [J]. CEPR Dicuion Pape, 2007, 77 (3): [7] Helpman E. Labo Maket Fiction a a Souce of Compaative Advantage, with Implication fo Unemployment and Inequality [J]. CEPR Dicuion Pape, [8] Dan Sheng, Kunwang Li, Yongjin Wang. Will Labo Mobility affect China' Regional Expot Compaative advantage? An Empiical Study Baed on the Indutial Segmentation Data of Povince [J] Wold Economic Reeach, 2010, pp [9] Wooton, I., & Haaland, J. I. (2007). Dometic labo maket and foeign diect invetment. Review of Intenational Economic, 15 (3), [10] Redding, Stephen J., "Good tade, facto mobility and welfae," Jounal of Intenational Economic, Elevie, vol. 101 (C), page [11] Sebatian Galiani & Gutavo Toen, "The Political Economy of Tade and Labo Mobility in a Ricadian Wold," NBER Woking Pape 21274, National Bueau of Economic Reeach, Inc. [12] Ahan, Rahad N. & Chattejee, Apita, "Tade libealization and integeneational occupational mobility in uban India," Jounal of Intenational Economic, Elevie, vol. 109 (C), page [13] Almeida, Rita K. & Poole, Jennife P., "Tade and labo eallocation with heteogeneou enfocement of labo egulation," Jounal of Development Economic, Elevie, vol. 126 (C), page [14] Guen Adam & Humu, David & Olen, Moten, "Tade Dynamic with Secto-pecific Human Capital,"Jounal of Intenational Economic, Elevie, vol. 97 (1), page [15] David H. Auto & David Don & Godon H. Hanon, "The China Shock: Leaning fom LaSbo-Maket Adjutment to Lage Change in Tade," Annual Review of Economic, Annual Review, vol. 8 (1), page , Octobe. [16] Cobett J. Enet Geoge Raventein, The Law of Migation, [J]. CSISS Claic, 2003.

6 30 Shuang Zhao: Impact of Labo Mobility on Compaative Advantage of Manufactuing Indutie in China: Empiical Analyi [17] David Ricado, the Wok of David Ricado, Vol. 1, On the Pinciple of Political Economy and Taxation, 2013 [M] The Commecial Pe. [18] Nunn N, Tefle Dometic Intitution a a Souce of Compaative Advantage [M]// Handbook of Intenational Economic. Elevie B. V. 2014: