Ownership Characteristics, Real Exchange Rate Movements and Labor Market Adjustment in China / Risheng Mao, John Whalley.

Format:

Book

Author/Creator:

Mao, Risheng.

Contributor:

National Bureau of Economic Research.

Whalley, John.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17565.

NBER working paper series no. w17565

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

This paper uses a firm level multi-industry data set covering 456 Chinese manufacturing sectors to assess the implications of Renminbi (RMB) real exchange rate appreciation for adjustments in employment and wage rates. We stress differences in both industry and firm characteristics within sectors. Our empirical results show that modest (and also larger) RMB real exchange rate appreciation would likely have pronounced effects on both net employment and wage rates. A 10% RMB appreciation would likely cause a net employment decline in Chinese manufacturing industries of between 4.1% and 5.3%, and a wage rate drop of 4% after controlling for other factors. Real exchange rate change effects by industry on net employment and wage rates vary significantly with the ownership characteristics of firms within industries. Employment and wage rates for private enterprises are less responsive to RMB real exchange rate fluctuations than is true for state owned enterprises (SOEs) and foreign invested enterprises (FIEs). This finding is opposite to the widely held belief that the labor market behavior of Chinese SOEs shows stronger labor market rigidities than for private firms. Impacts of exchange rate movements emerge as systematically related to export openness, overall import penetration and profit margins of individual manufacturing industries.

Notes:

Print version record

November 2011.