Janet Ceglowski

Does China Still Have a Labor Cost Advantage

Abstract In recent years wages in China have been rising and the yuan has appreciated, potentially eroding China’s cost advantage in manufactures. This paper explores the evolution of China’s relative unit labor costs in manufacturing over 1998-2009. Between 1998 and 2003 China’s unit labor costs fell, but since 2003 they have increased both absolutely and relative to US unit labor costs. Much of the rise in China’s relative unit labor costs can be traced to a real appreciation of the yuan against the dollar. Despite the recent rise, China’s unit labor costs remain low relative to those in most other countries.

Just How Low are China's Labour Costs?

This paper provides a new perspective on Chinese international competitiveness in manufacturing using relative unit labour costs. We find that Chinese unit labour costs are about 25-40 per cent of US labour costs. They are also low relative to costs in the EU, Japan, Mexico, Korea and most other newly industrialising countries. However, Chinas relative unit labour costs indicate a substantially smaller cost advantage than that implied by a comparison of wages alone. Chinas cost advantage derives from large currency devaluations that preceded the establishment of a de facto peg around 1995, and rapid productivity growth in the period since 1995. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd .

Dollar depreciation and US industry performance

Abstract This study analyzes the effects of the real exchange rate and the real interest rate on domestic sales, exports, and imports for 19 manufacturing industries and selected non-merchandise sectors in the USA. The estimates are combined with a simulation of an exogenous dollar depreciation to infer net industry effects of a non-policy induced drop in the value of the dollar. The results indicate that the direct impacts of the depreciation are concentrated in net exports, with only limited effects on home sales. Hoewver, the indirect effects of the depreciation, which work through the domestic interest rate and foreign and domestic income and prices, have a significant impact on domestic sales, as well as net trade, in both merchandise and non-merchandise sectors.

Has the border narrowed

In the late 1980s, Canadas provinces traded 20 times more with one another than with U.S. states of comparable size and distance. In other words, the Canada-U.S. border exerted a strong effect on the pattern of Canadas continental trade patterns. Since then, globalization and the formation of the Canada-U.S. and North American free trade areas could have reduced the impact of the border on continental trade patterns. However, estimates from a gravity model of aggregate Canadian trade reveal no evidence of a narrowing border, at least through 1996. The border effect appears remarkably stable both over time and across equation specifications.

On the structural stability of trade equations: the case of Japan

Abstract This study examines the stability of Japanese trade equations over the period 1976–1993. It finds evidence of parameter nondashconstancy in equations for both total and bilateral US-Japan trade. In most of the equations, the instability can be traced to changes in specific parameter estimates in the mid-1980s. In these cases, failure to account for the parameter changes leads to an underestimation of actual trade flows that, in some instances, is significant. By implication, standard trade equations estimated from historical data may not be applicable to the analysis of Japanese trade in the late 1980s and beyond.

The recent behavior of Japanese imports: A disaggregated analysis

Abstract This study investigates the factors behind the recent surge in Japanese imports. It finds evidence of a rise in the long-run income elasticity of total real imports in the mid-1980s. The increase derives from similar behavioral changes at the end-use level and, to a lesser extent, major compositional shifts in the structure of Japanese imports. The behavioral changes in aggregate and end-use imports are likely to reflect important structural developments in the Japanese import market and have potentially significant implications for the impact of macroeconomic policies in Japan on future import performance.

Can Africa Compete with China in Manufacturing? The Role of Relative Unit Labor Costs*

In this paper we examine Sub-Saharan Africa’s (SSA) bilateral trade and cost competitiveness with China. We review patterns of bilateral trade between SSA and China, showing an extraordinary imbalance in the structure of trade, in that China overwhelmingly exports manufactured products to SSA and almost exclusively imports primary products in return. Our principal means of assessing the competitiveness of SSA’s manufacturing sector, vis-a-vis China, are measures of relative unit labor costs (RULC). We find that African RULC levels have generally been very high relative to China, but declined over the 2000s as China’s wages have risen faster than Chinese productivity, while the reverse is true for the SSA countries in our sample. Nevertheless, RULC vis-a-vis China remained elevated for many SSA countries as of 2010. Generally high RULC along with weaknesses in the business climate suggest that most SSA countries are unlikely to be competitive in labor-intensive manufacturing any time soon.

Does the distinction between gross and value-added exports matter? An empirical investigation of export elasticities

This study uses bilateral U.S. export data from the OECD’s Trade in Value‐Added database to estimate and compare elasticities for three distinct export measures: conventional measures of gross exports, domestic value added in gross exports, and value‐added exports. It finds little evidence of significant differences in the income elasticities across the three export measures or in the price elasticities of gross exports and domestic value added in gross exports. However it finds a significantly higher price elasticity for value‐added exports, suggesting that conventional price elasticity estimates may underestimate the impact of a real dollar depreciation on U.S. exports of value added.