The importance of international trade increased dramatically for the US as well as China. The ratio of the sum of exports and imports to GDP approximately doubled from the early 1970s to the mid 2000s for the US. And there is a striking feature that China was involved in about 7% percent of world trade by the mid-2000s. There is no doubt that the international trade have influenced the wage level around the world.
Do wages equalize between US and China?
It is the most remarkable conclusion of the Heckscher-Olin theory that trade can equalize the price of each factor of production across countries. Nevertheless, the long-term effect didn’t complete in the real world, especially in China. On majoy trend has been a rising gap between the wages of china and US. For instance, from 2000 to the year of 2009, the average wage of Chinese to that of American decreased about %. In 1970, the two countries Per capita wage level difference for 4965 dollars. On the contrary, in 1980 it turned to be 11976 dollars, 1990 for 22885 dollars. And in year of 2000, it achieved 34166 dollars. Then there was a gradual increase in mid 2000s. And by 2010, the average wage of China is only about 6% of the minimum wage standard of US. All these data clearly prove the fact that the wage gap between China and US have increased for several years.
Workers' remittances and compensation of employees, paid ($ millions) | |2000 |2001 |2002 |2003 |2004 |2005 | |United States |26.2% |30.5% |8.2% |0.7% |17.0% |8.9% |
As shown in Figure5.3, China is relatively abundant in less-skilled and medium-skilled labor, and it is relatively scarce in physical capital, forest land, highly skilled labor, and arable land. But not all of China’s international trade is consistent with the Heckscher-Olin...