Employment growth not highly sensitive to the export sector
By Michael Pettis
The NBER published a paper in July by Robert Feenstra and Chang Hong on the employment effect of China's export growth. The paper is called "China's Exports and Employment".
The authors summarize one of their findings as "Growth in domestic demand led to three times more employment gains than did exports over 2000-2005, while productivity growth subtracted the same amount again from employment. We conclude that exports have become increasingly important in stimulating employment in China, but that the same gains could be otained from growth in domestic demand, especially for tradeable goods, which has been stagnant until at least 2002."
The authors argue that exports are not as important as many think in stimulating employment, and that domestic demand is far more important. This obviously has implications for currency management because one of the arguments against a too-rapid increase in the value of the RMB is the negative impact on employment. If employment growth is not terribly sensitive to export growth, the negative consequences on exports of a currency appreciation are less worrisome.
This jives with what some other research has suggested, although I guess arguments using productivity growth estimates run into a problem cited by Jon Anderson at UBS: China's official employment data do not include rural migrants, so what may show up as an increase in productivity (output grows faster than employment) may actually only mean that rural migrants are an increasingly large part of the work force -- which is perfectly plausible.
Michael Pettis is a professor at Peking University's Guanghua School of Management, where he specializes in Chinese financial markets. He has also taught, from 2002 to 2004, at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the board of directors of ABC-CA Fund Management Co., a Sino-French joint venture based in Shanghai.
Pettis has worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the Sovereign Debt trading team at Manufacturers Hanover (now JP Morgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was Managing Director-Principal heading the Latin American Capital Markets and the Liability Management groups. He has also worked as a partner in a merchant banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team. Besides trading and capital markets, Pettis has been involved in sovereign advisory work, including for the Mexican government on the privatization of its banking system, the Republic of Macedonia on the restructuring of its international bank debt, and the South Korean Ministry of Finance on the restructuring of the country’s commercial bank debt.
Pettis is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs. He is the author of several books, including The Volatility Machine: Emerging Economies and the Threat of Financial Collapse (Oxford University Press, 2001). He received an MBA in Finance in 1984 and an MIA in Development Economics in 1981, both from Columbia University.
Subscribe to this Site
Comments for "Employment growth not highly...
January, 2008
.