Transformations  in
Business & Economics

LOW-END LOCKING OR CROWDING-OUT EFFECTS - AN EMPIRICAL ANALYSIS OF CHINA'S MANUFACTURING INDUSTRY EMBEDDED IN GVCS
Lei Wang, Long Wei

ABSTRACT. The purpose of this study is to determine whether changes in the competitive advantages of China's manufacturing industry in the Global Value Chains (GVCs) cause crowding-out effects to replace previously identified low-end locking. Based on the World Input-Output Database (WIOD) data and the method developed by Koopman, Powers, Wang, and Wei (KPWW), the study measured and calculated the employment rates and wages for high, medium, and low skilled labour in 40 countries worldwide by deconstructing the added value of input-output data from 14 industries from 1995 to 2011. Then, the competitiveness of China's manufacturing industry was evaluated with respect to high-end technological innovation capability and low-end wage cost. The empirical results show that the magnitude of high-end talent expansion and quality improvement in China's manufacturing industry is larger than in Europe, the United States, Japan, demonstrating that China's manufacturing industry is not experiencing low-end locking. The competitive advantages of China's manufacturing industry change from the low cost of low-skilled labour to the low cost of middle and high-end labour. The major risks are now the crowding-out effects formed after the loss of cost advantages in the low value-added sector during the transformation and upgrading process .

KEYWORDS:  competitive advantage, crowding-out risk, employment quality, global value chain, low-end locking, China.

JEL classification:  F16, J21, J31, L52.