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The impact of trade liberalisation on the gender wage gap in urban China: The role of sectoral switching costs

Published online by Cambridge University Press:  25 August 2023

Haopeng Sun Open the ORCID record for Haopeng Sun [Opens in a new window]
Haopeng Sun*
Affiliation:
School of Economics, Shanghai University of Finance and Economics, Shanghai, China
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Email: sunhaopenghappy@yeah.net
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Abstract

The effect of trade liberalisation on the welfare of workers depends on the nature and magnitude of switching costs that workers face in moving across sectors. This paper investigates the impact of trade liberalisation on the gender wage gap in China, emphasising the role of sectoral switching costs in driving the effect. Using the local labour market approach as the identification strategy, I find that a one-standard-deviation increase in regional trade exposure is associated with a 3.2% increase in the gender wage gap during the 1992–2009 period. The emergence of the empirical pattern is mainly because the sectoral switching costs are larger for females than males. Since trade liberalisation leads to labour reallocation across sectors, the presence of asymmetric sectoral switching costs thus prevents female workers initially employed in the manufacturing sector from accessing advanced service industries, resulting in a rising gender wage gap after the trade. As a response, female manufacturing workers are forced to either be employed in low-skill service industries or exit the labour market. This paper carries strong implications for policies that both promote gender equity and help trade-displaced workers.

Keywords

gender wage gaplabour market frictionslocal labour marketsectoral switching coststrade liberalisationlabour economicsinternational tradeeconomics of the householdF14F16J23J31
Type
Original Article
Information
The Economic and Labour Relations Review , Volume 34 , Issue 3 , September 2023 , pp. 444 - 467
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of UNSW Canberra

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