The Effect of Processing Trade on Employment: in Case of China

Abstract

In this paper, we use panel data from 2002 to 2008 on China's 31 provinces to analyze the effect of processing trade on regional employment. The results give evidence that processing trade has a significant and positive skill-bias effect on regional employment. Hereinto, processing imports, including PIM and PSM imports, and especially the capital goods imports by processing trade, is the root of the skill-bias effect of processing trade on employment. Net processing exports is a driving to expand employment, including both skilled and the unskilled. But only PIM contributes to it.