The wage premium and market structure: theory and empirical evidence from Chilean manufacturers

PurposeThis paper aims to examine how the “wage premium,” the percentage by which wages earned by skilled workers exceed those of unskilled workers, varies across industries characterized by different levels of competitiveness.Design/methodology/approachA theoretical model employing constant elasticity of substitution (CES) utility function and constant returns to scale production function is developed and analyzed to derive the effects of industry competitiveness on the wage premium. Econometric methods are applied to Chilean manufacturing data to test implications of theoretical model.FindingsOnce the relative factor endowment is being controlled, market competition significantly reduces the wage premium. More specifically, given with the same relative factor endowment, the wage premium is significantly higher under oligopolistic competition than under monopolistic competition. Empirical evidence from Chilean manufacturers supports our theoretical conclusions.Practical implicationsDuring economic development, the reallocation of production factors from unskilled labor-intensive to skilled labor-intensive industries raises the wage premiums received by skilled workers. Besides, skilled workers will earn higher wages by working in more highly concentrated industries instead of more competitive industries. This needs to be considered by government policymakers who must balance promotion of technical change with prevention of extreme the income inequality.Originality/valueThis paper examines how market structure affects wage premiums, providing new insights into a well-established literature that largely maintains that wage premiums are primarily a function of relative factor endowments or international trade.

The Impact of Trade Liberalization on the Environment: A Case Study of Fujian Province, China

With the rapid development of international trade and the continuous deterioration of the environment worldwide, the issue of impact of trade on energy consumption and pollution emissions has drawn widespread attention of the international community. Theoretical circles have different views on the impact of trade liberalization on the environment. The hypotheses of “Pollution Haven” and “Environmental Factor Endowment” are both representative theories. Based on the revised input-output model, this paper estimates the trade embodied carbon emissions of import and export commodities in Fujian Province from 2008 to 2016. The results show that Fujian Province is a net export region with implicit carbon emissions, and there is a significant pollution surplus in international trade. But because the embodied carbon pollution per unit of imports is greater than the embodied carbon pollution per unit of exports, the terms of trade for carbon emissions are less than 1. Therefore, the hypothesis of “Environmental Factor Endowment” can explain the environmental impact of Fujian’s trade liberalization better than the “Pollution Haven”.

Analysis of agricultural trade in China based on the theory of factor endowment

Purpose. The purpose of the paper is to present the results of the study of agricultural trade in China based on the theory of factor endowment and to develop a policy recommendation for the intensification of agricultural trade based on technological progress. Methodology / approach. This paper uses the methods of economic theory and comparative analysis to study the development of agricultural products trade in China; analysis the advantages of developing agricultural products trade in China by using comparative advantage theory; and econometric analysis to study the relationship between volume of agrarian trade and agricultural labor force, capital and land resources. Results. This paper uses time series data to analyze the three elements of capital, labor and land, and the development of agricultural trade in China. According to the established data model, it is obviously that China’s agricultural production of land factor endowment constraints are obvious, labor factor endowment is abundant but also facing the problem of increasing costs, labor personnel gradually decline. In this case, technological progress is more critical to the cultivation and maintenance of comparative advantage of agricultural products. The government should guide the direction of technological changes, technical support, capital support (material capital and human capital); and promote the rapid development of China’s agricultural trade. Originality / scientific novelty. Author’s developed econometric model is very useful in empirical assessment for the China agricultural products trade development, and it also provides new decisions for China to develop agricultural trade. Accordingly, the proposed method can provide an answer to the question of how to develop traditional agriculture in the context of rapid economic changes, and put forward more practical countermeasures. Practical value / significance. The main proposals can be used by the Government of China to formulate better agricultural trade policies and achieve rapid economic growth and increasing farmer incomes.