Natural Openness,Policy-oriented Openness and Improving Labor Productivity——a Study Based on China's Interprovincial Panel Data

Based on a Ricardian trade model,this paper analyses the effect of trade openness on China's labor productivity.It uses China's inter-provincial panel data through 1994-2005 to conduct an empirical study on the effect of the way trade openness improves China's labor productivity.We have two major results.First,trade openness can determine specialization of production of a country through comparative advantage.If the comparative advantage of a country lies in the sector with higher learning-by-doing coefficient,trade openness will enhance the labor productivity;if the comparative advantage of a country lies in the sector with a lower learning-by-doing coefficient,trade openness will decrease the labor productivity.Second,this paper divides trade openness into natural openness and policy-oriented openness.We found that when natural openness is relatively low,policy-oriented openness will reduce labor productivity while policy-oriented openness will raise labor productivity when natural openness was relative high.