The Impact of Machinery Importation on China´s Development
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| License | CC Attribution 3.0 Unported: You are free to use, adapt and copy, distribute and transmit the work or content in adapted or unchanged form for any legal purpose as long as the work is attributed to the author in the manner specified by the author or licensor. | |
| Identifiers | 10.21036/LTPUB10891 (DOI) | |
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Transcript: English(auto-generated)
00:04
Human capital is important for the long-run economic growth. The impact of international trade on human capital accumulation has been an essential topic for both policymakers and academics. However, this question has rarely been explored in the literature.
00:22
In this paper, I study the impact of imported machinery on human capital accumulation and migration in China. This paper is motivated by two striking facts. The first fact is that the share of Chinese people with college education increased dramatically over the past few decades.
00:42
In 1990, the share of Chinese people with college education was only 2%. Two decades later, it quickly rose to over 8%, accompanied with a rapid increase in the share of people with college education was a rapid increase in college wage premium.
01:02
Here, college wage premium is a wage gap between workers with college education and those without. In 1992, workers with college education earned 14% more compared to workers without college education. Two decades later, the college wage premium quickly rose to about 44%.
01:26
The increase in college wage premium and the share of people with college education suggests that the demand for skill has increased in China. And here is a research question. Why does the demand for skill increase in China?
01:42
Why does the share of Chinese people with college education increase so rapidly? My answer to this question is imported machinery. Here goes the story. For developing countries like China, technological advances mainly come from technology adoption
02:02
rather than domestic innovation. Advanced technologies are usually embodied in machinery. Because machinery is skill complementary, importing machinery will drive up the demand for skill. When we say machinery is skill complementary, we mean that importing machinery will drive
02:23
up the marginal productivity of skilled workers more compared with that of low skilled workers. In the short run, because the supply of skill is inelastic, importing machinery will drive up the demand for skill and drive up the college wage premium. In the long run, however, the supply of skill can slowly respond to the rising skill premium.
02:48
To test this story, I take the 330 Chinese prefectures as a unit of analysis. I explore the regional variations in imported machinery across the universe of prefectures.
03:02
The first data I use is the population surveys in 2000, 2005, and 2010. The data are representative. Besides, they offer detailed migration history information, which allows me to tell who are local stairs, who are immigrants, and who are emigrants.
03:22
Here, an immigrant is defined as someone who lived in the same prefecture over the past five years. In the analysis, I use a first difference approach and study the growth in imported machinery per capita on the growth in the share of people with college education across prefectures.
03:42
To tackle causality, I adopt an instrumental variable strategy. I construct a shift share instrument, which combines the initial mix of imported machinery with the national import growth. I have three key findings.
04:02
First, I find that imported machinery is indeed a key driver for the rapid human capital accumulation in China. It can roughly explain 27% of the regional differences in the share of people with college education. Second, the great data allows me to explore the underlying mechanisms.
04:23
The supply of skill can respond to imported machinery through three channels. First, skill acquisition, which means that people now have stronger incentive to attend college. Second, more skilled immigrants. Third, less skilled emigrants.
04:43
In other words, less brain drain. Third, I provide supportive evidence. If this story is true, we should observe that regions with more imported machinery had higher college wage premium. Indeed, this is what I find. Furthermore, I find that the effect of imported machinery on college wage premium
05:05
attenuates over time as the skill of supply slowly increase. In this paper, I plan to make a big push forward in understanding the labor market consequences of technology adoption.
05:22
The major contribution of this paper is to study how international trade affects human capital accumulation and migration through its interactions with capital skill complementarity in the context of an emerging economy like China, a major machinery importer. Regarding policy relevance, the findings of this paper will allow policymakers in both
05:45
developed countries and developing countries to have a better understanding of the labor market consequences of technology adoption. In this paper, I study the impact of imported machinery on human capital accumulation
06:01
and migration in China. An interesting follow-up question is, is this story specific to China? Can this mechanism be applied to other developing countries? To explore this question, I provide some international comparison. I find that, except for China, other developing countries also imported a lot of machinery
06:24
during their economic take-off. And this question needs further investigation. Another open question is, can China continue to rely on the imports of machinery? The answer is probably no. On one hand, as Chinese firms are becoming closer to the international technology frontier,
06:46
the gains from technology adoption shrink. On the other hand, for developing countries, they are becoming more conservative in terms of technology transfer. In the future, China will rely more on domestic innovation rather than international
07:03
technology transfer.