Effects of global trade integration on skill polarization and wage disparity

This paper examines how the wage gap and skill distribution among workers with different skills respond to trade integration. Using Chinese city-level data for 2010–2020, we find that trade has a negative impact on the wage gap between middle and primary skilled workers based on their education, and a positive impact on the wage gap between high and middle skilled groups. The former has a negative effect on the mean value and distribution of labor skills, while the latter has a positive effect. Therefore, international trade activities will induce the problem of skill polarization, and the wage gap can explain 50% of the effect of trade on skill polarization. In addition, in the middle-aged group of workers and high-tech intensive industries, the income gap, especially the income gap between high and middle skill groups, brings about the problem of skill polarization.