The Relation of Export and Employment ofChina

Abstract: Export is seen as foreign demand for domestic goods. Therefore for long export has been considered being able to promote Chinas GDP as well as employment. However， for recent years， there is a paradoxical phenomenon that we have high growth rate of export along with the problem of unemployment. In this essay we build a VAR model to analysis the mutual impact of employment， GDP and export to show that there may be no significant correlation between Chinas export and employment.

Key words: Export Employment Time Series Analysis

1. Introduction

SinceChina has become a member of WTO， there are more closely relationship between china and the world. The international trade plays an important role in chinas economic development. From 2001 to 2008， trade surplus increased by 13 times. According to the general economic theories， export should have direct and positive effect on gross domestic product and can promote the domestic employment. In the real economy however， we did not see a strong increasing in employment since 2005. This is a confusing phenomenon. In this essay there will be an empirical analysis to reveal it.

2. Literatures Review

Although the neoclassical theory states that there is positive relationship between export and employment， there are many literatures trying to prove the 1 relation between them. Lori Kletzer (2002) began with making the interesting observation that the majority of earlier studies. The distinction between prior analyses and Kletzers own studies on the effect of trade on jobs makes the contribution of her book even more important. Kletzer explains international trades effect on jobs is more a distributional issue than a numbers issue. It is generally this distributional aspect that the author addresses.

Focusing onChina， Dooley (2003) argued that China seeks to raise employment by 10-12 million per year. In fact， total employment increased by 7.5-8 million. And the growth in domestic demand led to threetimes more employment gains than exports over， while productivity growth subtracted the same amount again from employment. Exports have become increasingly important in stimulating employment， but that the same gains could be obtained from growth in domestic demand.

3. Empirical analysis

Since we only concern the mutual effect of GDP， employment and export， we will choose VAR model as it ignores the impact from other factors and only calculates the mutual impact of endogenenous variables.

Y is a column vector with 3 degrees， including GDP，EML (stand for employment) and EX (stand for export). Yt is its value at period t. A1……Ap are the coefficient matrixes we need to estimate. Et is white noise. All these three series of seasonal data are from the spring of 2002 to the autumn of 2009.

TheADF test shows that each of the three data series has a unit root. However， the 1st order difference of Ln(EML) and Ln(GDP) have not. So they are both I(1). But Ln(EX) is stationary in its 2nd order difference， so △Ln(EX) is also I(1). Therefore we can put it into the vector of dependent variables with Ln (GDP) and Ln(EML).

Exam the models lag length criteria. The judgment standard is to minimize the AIC and SC value， at the same time to maximize the LR value. When the lag length is 1 the model satisfies this standard perfectly. So we set the model as VAR(1).

The cointegration test rejects the 1 hypothesis that there is at most 1 cointegration in the model. So the variables have cointegrations in the long run. Therefore this VAR(1) model is not a spurious regression.

4. Conclusions and policy suggestions

According to table， the contribution from export to employment is increasing along with time going. However， the impact is still very small even if 2 years (8 seasons) have passed. Therefore we get the conclusion that export has no significant effect on Chinas volume of employees.

Chinas long history of exporting laborintensive products has led a gigantic number of employees accumulated in the export department. Currently， many companies have stepped in the dilemma that simply employing more workers has little marginal profit. Additionally， companies are faced with increased price in the labor market. To stay in the industry， it is emergent to reduce companies cost and expense to improve their situations. Hence， they have little incentive to create more jobs.

The old industrial structure of export department is limiting the potential job creating ability of China. Only if the industrial structure has been shifted to higher level and companies have reached new equilibriums of scale economy， will employing more workers be their optimal choice.

Reference

Feenstra.Robert C; Hong， Chang， “Chinas Exports and Employment”， National Bureau of Economic Research， 2007

Lori.G.Kletzer， “Imports， Exports， and Jobs: What Does Trade Mean for Employment and Job Loss?”， Upjohn Institute for Employment Research， 2002

William W.S.Wei， “Time Series Analysis， Univariate and Multivariate Methods， 2nd Edition”，China Renmin University Press， 2009

James.D.Hamilton: “Time Series Analysis and Its Applications， 2nd Edition”， Springer Verlag， 2005

(責任編輯：韓 梅)