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Measured Wage Inequality and Input Trade Liberalization: Evidence from Chinese Firms


E2016006                                                                April 2016
Bo Chen   Miaojie Yu    Zhihao Yu


This paper investigates how input trade liberalization affects within‐firm wage inequality betweenskilled and unskilled labor. First a Mincer‐type approach is developed to estimate the impact using Chinese firm‐level production data. After controlling for output trade liberalization, the analysis finds evidence that input trade liberalization widens within‐firm measured wage inequality. The effect is more pronounced for importing rms. The analysis also finds wage polarization in China:the middle range of workers in the skill distribution has gained relatively less in real terms from input trade liberalization compared with less and more skilled workers.
The findings are robust to different measures of wage inequality, as well as different empirical specifications and data spans.

JEL Classifications: F10, F12, F14

Keywords: Wage Inequality, Input Trade Liberalization, Firm Evidence

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