Data/methods: The model is estimated using annual data over the period 1976 to 2008 for 100 nations. The dependent variables are the log of real wages, unskilled wages and skilled wages in manufacturing measured in 2000 US dollars. The disaggregation of total manufacturing wages into skilled and unskilled marries the analysis to the Stolper-Samuelson theorem, which discusses absolute changes in skilled and unskilled wages as drivers of wage inequality in trade-oriented economies. The effect of Chinese imports on wages is tested with a measure of import penetration of Chinese manufactured goods. Import penetration is the most intuitively appealing approach to studying the effect of industries facing foreign competition as it measures the proportion of a country's domestic consumption accounted for by imported goods. The data comes from UN Comtrade (various years) and UNIDO (2010). The remaining explanatory variables are the log of real gross fixed capital formation per worker in 2000 US dollars and real GDP per capita in thousands of 2000 US dollars.
Results: This paper finds evidence suggesting that import penetration of manufactured goods has a significantly negative, albeit small, effect on manufacturing real wages (skilled, unskilled and total) on more developed economies and an insignificant effect in developing countries. The results are robust to a large number of tests. The findings are consistent with previous studies in two ways. Firstly, they support evidence indicating that the main cause of the deteriorating situation of workers in developed countries has been expansion of trade with developing countries, such as China. Secondly, they support the fact that China’s exports have become relatively more skilled–intensive through time and are thus more likely to displace workers in developed than in developing nations.