Technical Change, Exports, and Employment Growth in China: A Structural Decomposition Analysis

Abstract

This paper analyzes the sources of employment growth and assesses the contribution of exports to job creation in China. To do so, we utilize an input–output table to decompose employment growth into contributions from technical change, labor productivity, domestic final demand, and exports of domestically produced output. Our main data source is the annual input–output data from the China Industrial Productivity Database covering 1981–2010, of which employment figures have been adjusted to account for serious structural breaks observed in official statistics. The input–output framework allows us to explore both the direct impact of exports on employment within a given industry and the indirect impact through inter-industry transactions. Our major findings are four-fold. First, the increase in final demand, including both domestic demand and exports, is the main driver of employment growth in China. The strong growth in final demand offsets the decline in employment caused by enhanced labor productivity, especially during the 2000s. Second, the contribution of exports to job creation has increased significantly, especially in manufacturing and agriculture, following China's accession to the World Trade Organization. Third, labor productivity accelerated in all sectors, led by manufacturing. Last, most technical upgrading occurs in manufacturing, whereas agriculture experiences increased technical upgrading through the decline in labor usage.

Structural decomposition analysis of Latvian agrifood sector as integral part of global market

“…Similar results for Chinese economy are reported by Doan and Trinh (2019) where the increase in final demand, including both domestic demand and exports, is the main driver Changes in final demand for processed products are the main force behind the changes in all three variables. The significant increase in exports, in turn, is the main contributor to growth in final demand as household consumption has markedly declined.…”

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Measuring Technological Change through an Extended Structural Decomposition Analysis: An Application to EU-28 Primary Sectors (2010–2015)

“…In China, for example, the sources of employment growth were analyzed using this method. It was found that the contribution of exports to job creation increased significantly, especially in agriculture (Doan and Long 2019). The present investigation aims to fill this gap in literature using SDA to measure technological change.…”

Intersectoral and intercountry linkages as drivers of employment growth in emerging economies: The case of Visegrád countries

“…We adopted the additive version of SDA, decomposing the variation of the hours worked in the manufacturing subsystem of the V4 countries between 2000 and 2014, identifying the following drivers: change in labour intensity, change in technology, and change in the final demand; the latter determinant was further decomposed into change in final domestic demand and change in final foreign demand. Following Miller and Blair (2009), Rose and Casler (1996), and Doan and Long (2019), our starting point was the subsystem and Equation (1).…”