Envisioning the impact of the belt and road initiative on regional labor markets

Abstract

Using trade and labor-force data of the western provinces from 1994, this study empirically proved the existence of a long-running equilibrium between foreign trade and labor size in western China. By constructing a vector autoregressive model, the results show that the "opening toward the west" policy increased western China's import and export, both of which attracted an inflow of labor force. After analyzing the numerical effect, a Shift-Share Analysis (SSA) and an analysis of the deviation degree of industrial structure are conducted, to measure the possible structural changes in the labor force. We find that manufacturing in the western provinces is comparatively more advantageous than manufacturing at the national level, which theoretically calls for a huge labor demand. Agriculture presents a contrasting result. This result is consistent with the results of the deviation degree analysis. In conclusion, the Belt and Road Initiative (BRI) has changed the trade patterns, and it has enhanced the comparative advantages of western China and it is expected to bring about changes in both the number and the structure of the local labor force, and it provides new impetus for the region's development.