Social Sciences in China (Chinese Edition)

No.5, 2019

The Wage Bargaining Power of Labor in an Open Economic System

(Abstract)

Xie Shenxiang, Lu Yi and Cai Xiqian

In an imperfectly competitive labor market, wages depend on the bargaining power of labor. Accordingly, the effective measurement of this bargaining power will help us identify and understand the factors and mechanisms determining wages. Drawing on bargaining models, we constructed a theoretical analytical framework of wage bargaining between a single worker and the company. On this basis, we put forward a method of measuring labor’s wage bargaining power. We further take Chinese Microenterprise Data as a sample to analyze the effect of trade policy stability on labor’s wage bargaining power in open economic conditions. Our findings show that a more stable trade policy raises labor’s wage bargaining power, which implies that trade policy stability is an important factor influencing wages. This conclusion helps to deepen our understanding of the mechanisms determining wages in an open economic system.