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Just How Low are China's Labour Costs?

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  • Janet Ceglowski
  • Stephen Golub

Abstract

This paper provides a new perspective on Chinese international competitiveness in manufacturing using relative unit labour costs. We find that Chinese unit labour costs are about 25–40 per cent of US labour costs. They are also low relative to costs in the EU, Japan, Mexico, Korea and most other newly industrialising countries. However, China's relative unit labour costs indicate a substantially smaller cost advantage than that implied by a comparison of wages alone. China's cost advantage derives from large currency devaluations that preceded the establishment of a de facto peg around 1995, and rapid productivity growth in the period since 1995.

Suggested Citation

  • Janet Ceglowski & Stephen Golub, 2007. "Just How Low are China's Labour Costs?," The World Economy, Wiley Blackwell, vol. 30(4), pages 597-617, April.
    • Handle: RePEc:bla:worlde:v:30:y:2007:i:4:p:597-617
    DOI: 10.1111/j.1467-9701.2007.01006.x
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    References listed on IDEAS

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    1. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, April.
    2. Szirmai, Adam & Ren, Ruoen & Bai, Manyin, 2005. "Chinese Manufacturing Performance in Comparative Perspective, 1980-2002," Center Discussion Papers 28525, Yale University, Economic Growth Center.
    3. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2005. "Why the renminbi might be overvalued (but probably isn’t)," Proceedings, Federal Reserve Bank of San Francisco.
    4. Zeng, Douglas Zhihua, 2005. "China's employment challenges and strategies after the WTO accession," Policy Research Working Paper Series 3522, The World Bank.
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    Cited by:

    1. Egger, Peter H. & Li, Jie & Wu, Han, 2024. "Decomposing China’s bilateral export growth: A firm-regional-transactions structural gravity approach," European Economic Review, Elsevier, vol. 164(C).
    2. William MILBERG & Deborah WINKLER, 2011. "Economic and social upgrading in global production networks: Problems of theory and measurement," International Labour Review, International Labour Organization, vol. 150(3-4), pages 341-365, December.
    3. Chen, Feng-Wen & Xu, Jingwei & Wang, Jiang & Li, Zhilong & Wu, Yongqiu, 2023. "Do rising labour costs promote technology upgrading? A novel theoretical hypothesis of an inverted U-shaped relationship," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 327-341.
    4. Campbell, Douglas L., 2016. "Measurement matters: Productivity-adjusted weighted average relative price indices," Journal of International Money and Finance, Elsevier, vol. 61(C), pages 45-81.
    5. Wang, Chao & Zhang, Yue-Jun, 2022. "The effect of environmental regulation and skill premium on the inflow of FDI:Evidence from Chinese industrial sectors," International Review of Economics & Finance, Elsevier, vol. 81(C), pages 227-242.
    6. Fangtao Liu & Yong Ding & Jia Gao & Pu Gong, 2017. "Effects of Cost Factors on National Manufacturing Based on Global Perspectives," Economies, MDPI, vol. 5(4), pages 1-16, November.
    7. Adam Blake & Ziliang Deng & Rod Falvey, 2009. "How does the productivity of foreign direct investment spill over to local firms in Chinese manufacturing?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 7(2), pages 183-197.
    8. Yuting Li & Karsten Mau & Mingzhi Xu, 2023. "Rising Wages and Intra-Country Industry Relocation: Evidence from China," Open Economies Review, Springer, vol. 34(3), pages 579-615, July.
    9. Michael Mitchell Omoruyi, Ehizuelen, 2016. "Can Cheetah Beat Tiger? A Comparative Analysis of Chinese Industrial Competitiveness with Sub-Saharan African Countries," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 39(3-4), pages 41-76, sept-dec.
    10. Hideyuki Mizobuchi, 2015. "Measuring the comprehensive wage effect of changes in unit labor cost," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-12, December.

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