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Labor price distortion and export product markups: Evidence from China labor market

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  • Mingyi, Wang
  • Zhongyi, Zhang
  • Xiaoyu, Liu
  • Siwei, Xu

Abstract

In the context of expanding the new pattern of opening-up, how to improve export product markups is of great significance to China's high-quality export development. This paper systematically investigates the impact of labor price distortion on the markups of export products by using the combined data of Chinese industrial enterprise database and customs database from 2000 to 2013. The results show that labor price distortion significantly inhibits the increase of export product markups of China's manufacturing enterprises, and the above conclusion is still robust after using various methods for robustness test, but this effect is heterogeneous due to different factor intensity, export destination, trade mode, region and ownership. The mechanism tests demonstrate that labor price distortion inhibits the increase of markups through inhibiting R&D innovation, reducing factor allocation efficiency and causing low efficiency of enterprise scale, among which R&D innovation is the most important channel. In addition, this paper examines the impact of labor price distortion on the change of industry aggregated markups, and finds that intra-enterprise effect and entry effect are the main channels for labor price distortion to inhibit industry aggregated markups, while inter-enterprise effect and exit effect have little impact on industry aggregated markups. Our findings provide a new perspective for reinterpreting the mystery of low markups of Chinese export product, and provides an important decision-making basis for the improvement of China's export product markups.

Suggested Citation

  • Mingyi, Wang & Zhongyi, Zhang & Xiaoyu, Liu & Siwei, Xu, 2023. "Labor price distortion and export product markups: Evidence from China labor market," China Economic Review, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:chieco:v:77:y:2023:i:c:s1043951x22001596
    DOI: 10.1016/j.chieco.2022.101901
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    More about this item

    Keywords

    Labor price distortion; Export product markups; Mediation effect model; Industrial aggregated markup;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F19 - International Economics - - Trade - - - Other

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