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Capital Goods Import, Capital-Skill Complementarity, and Relative Wage Gap in China |
YU Mei ci |
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Abstract The wage of skilled labor relative to unskilled labor has grown significantly over the last 20 years in China. Many studies have found that international trade and skill-biased technological change are the main factors responsible. The paper provides a new explanation for the rising in relative wage gap based on the mechanism of capital-skill complementarity. China is a net importer of capital goods, which induces the accumulation of capital. The paper empirically studies the complementarity between imported capital goods and skilled labor, examines the effect of capital-skill complementarity on relative wage gap in China. It concludes that, the effect of capital-skill complementarity is significant in the long run, so that capital accumulation induced by capital goods import is associated with a high marginal productivity, and a rise in skilled demand and the skilled-unskilled wag gap, meaning that capital-skill complementarity accounts for a lot of the variations in the relative wage
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Received: 19 October 2012
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Corresponding Authors:
YU Mei ci
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