Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 15, No. 3, pp.437-480
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 2002
Received 14 Oct 2002 Revised 14 Mar 2003

The Impact of Increasing Import Competition on Employment and Wages in the Manufacturing Industries of the Asian Newly Industrialized Countries (NICs)

Jonathan Joo
Department of Economics, 3151 Social Science Plaza, University of California, Irvine, CA, CA 92697, Tel: +1-949-824-4828 jjoo@uci.edu

JEL classification: F14, J23

Abstract

This paper examines the impact of increasing import competition on employment and wages in the Asian Newly Industrialized Countries (NICs). I use the aggregate industrial level of annual data, consisting of twenty-eight International Standard Industrial Classification (ISIC) three-digit manufacturing industries, in Hong Kong, S. Korea, Singapore and Taiwan, during the period of 1980-1997. Import competition is measured by the import share of each industry. The reduced form of employment and wage equations derived from a standard competitive model of labor demand and supply that determines factor allocations and factor prices across industries is estimated. The empirical result indicates that import competition significantly decreased both employment and wages in Hong Kong, S. Korea and Singapore. The previous literature shows that in developed countries the labor adjustments, following increasing trade, occurred only in the form of employment, not of wages. However, this sluggish wage movement did not occur in the NICs. I also use a simulation method to compare the actual impact of import competition on labor adjustments with the counterfactual paths. The labor response to import competition is not uniform across sectors and countries.

References

  • Abowd, John A., and Lemieux, Thomas. “The Effects of International Competition on Collective Bargaining Outcomes: A Comparison of the United States and Canada.” In John M. Abowd, and Richard Freeman (eds.), Immigration, Trade and the Labor Market, Chicago: University of Chicago Press, pp. 343-67, 1991. [https://doi.org/10.3386/w3352]
  • Autor, David, Lawrence H., Katz, F. and Krueger, Alan B. “Computing Inequality: Have Computers Changed the Labor Market?” Quarterly Journal of Economics 113 (1998): 1169-213. [https://doi.org/10.1162/003355398555874]
  • Berman, Eli, Bound, John and Griliches, Zvi “Changes in the Demand for Skilled Labor Within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufactures.” Quarterly Journal of Economics 109 (1994): 367-97. [https://doi.org/10.2307/2118467]
  • Bertrand, Marianne. “From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship.” Princeton Industrial Relations Section Working Paper 410 (1998): 1-59. [https://doi.org/10.3386/w6900]
  • Blonigen, Bruce A., and Jackson, Matthew. Slaughter, “Foreign-Affiliate Activity and U.S. Skill Upgrading,” The Review of Economics and Statistics 83 (No. 2 2001): 362-76. [https://doi.org/10.1162/00346530151143888]
  • Borjas, George J., and Ramey, Valerie A. “Wage Inequality and International Trade.” In Jeffrey H. Bergstrand et al. (eds.), The Changing Distribution of Income in an Open U.S. Economy. pp. 217-41, 1994. [https://doi.org/10.1016/B978-0-444-81559-0.50015-2]
  • Borjas, George J., and Ramey, Valerie A. “Foreign Competition, Market Power, and Wage Inequality.” Quarterly Journal of Economics 110 (1995): 1075-110. [https://doi.org/10.2307/2946649]
  • Currie, Janet, and Harrison, Ann. “Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco.” Journal of Labor Economics 15 (1997): S44-S71. [https://doi.org/10.1086/209876]
  • Driffield, Nigel, and Taylor, Karl. “FDI and the Labour Market: A Review of the Evidence and Policy Implications.” Oxford Review of Economics Policy 16(3) (2000): 90-103. [https://doi.org/10.1093/oxrep/16.3.90]
  • Feenstra, Robert C., and Hanson, Gordon H. “Globalization, Outsourcing, and Wage Inequality.” American Economic Review 86 (No. 2 1996): 240-5. [https://doi.org/10.3386/w5424]
  • Feenstra, Robert C., and Hanson, Gordon H. “Foreign Investment, Outsourcing, and Relative Wages.” In R. C. Feenstra, G. M. Grossman, and D. A. Irwin (eds.), The Political Economy of Trade Policy; Papers in Honor of Jagdish Bhagwati, MIT Press, pp. 89-127, 1996. [https://doi.org/10.3386/w5121]
  • Feenstra, Robert C., and Hanson, Gordon H. “Foreign Direct Investment and Relative Wages: Evidence from Mexico.” Journal of International Economics 42 (1997): 371-93. [https://doi.org/10.1016/S0022-1996(96)01475-4]
  • Feenstra, Robert C., and Hanson, Gordon H. “The Impact of Outsourcing and High Technology Capital on Wages: Estimates for the United States, 1979-90.” Quarterly Journal of Economics; 114 (No. 3 1999): 907-40. [https://doi.org/10.1162/003355399556179]
  • Feenstra, Robert C. “World Trade Flows, 1980-97.” Institute of Governmental Affairs, University of California, Davis, pp. 1-37, 2000.
  • Freeman, Richard B., and Katz, Lawrence F. “Industrial Wage and Employment Determination in an Open Economy.” In John M. Abowd and Richard Freeman (eds.), Immigration, Trade and the Labor Market, Chicago: University of Chicago Press, pp. 235-59, 1991.
  • Gaston, Noel, and Trefler, Daniel. “The Labor Market Consequences of the Canada-U.S. Free Trade Agreement.” The Canadian Journal of Economics 30 (No. 1 1997): 18-41. [https://doi.org/10.2307/136358]
  • Grossman, Gene M. “The Employment and Wage Effects of Import Competition in the United States.” NBER 1041 (1986): 1-39. [https://doi.org/10.11130/jei.1987.2.1.1]
  • Grossman, Gene M. “Imports as a Cause of Injury: The Case of the U.S. Steel Industry.” Journal of International Economics 20 (1986): 201-223. [https://doi.org/10.1016/0022-1996(86)90019-X]
  • Hanson, Gordon, and Harrison, Ann. “Trade. Technology, and Wage Inequality.” NBER 5110 (1995): 1-46. [https://doi.org/10.3386/w5110]
  • Harrison, Ann, and Leamer, Edward. “Labor Markets in Developing Countries: An Agenda for Research.” Journal of Labor Economics 15 (1997): 1-19. [https://doi.org/10.1086/209874]
  • Harrison, Ann and Gordon Hanson, “Who Gains from Trade Reform? Some Remaining Puzzles." Journal of Development Economics 59 (1999): 125-54. [https://doi.org/10.1016/S0304-3878(99)00008-5]
  • Johnston, Jack, and DiNardo, John. Econometric Methods, 4th Eds. New York: The McGraw-Hill Companies, Inc, 1997.
  • Revenga, Ana L. “Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing.” Quarterly Journal of Economics 107 (1992): 367-397. [https://doi.org/10.2307/2118329]
  • Revenga, Ana L. “Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing.” Journal of Labor Economics 15 (1997): 20-43. [https://doi.org/10.1086/209875]
  • Staiger, Douglas, and Stock, James H. “Instrumental Variables Regression with Weak Instruments.” Econometrica, 65 (No. 3 1997) 557-86 [https://doi.org/10.2307/2171753]
  • Stock, James H., and Yogo, Motohiro. “Testing for Weak Instruments in Linear IV Regression.” NBER 0284 (2002). [https://doi.org/10.3386/t0284]
  • Suarez, Javier. “The Employment and Wage Effects of Import Competition in Switzerland.” International Journal of Manpower 19 (No. 6 1998): 438-48. [https://doi.org/10.1108/01437729810233271]
  • Tsou, Meng-Wen. “Wage differentials in Taiwanese Manufacturing, 1982-97.” Asian Economic Journal 16 (No. 4 2002): 317-35. [https://doi.org/10.1111/1467-8381.00155]
  • Wood, Adrian. “North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World.” Oxford University Press, New York, 1994.