Authors: Taegoo Kwon(KDI), Nakil Sung(University of Seoul), Minchang Kim(National Assembly Research Service)

This study examines the effects of Korea’s trade with China on labor markets in Korean manufacturing sector, especially the number of employees and the average wage levels in Korean manufacturing industries. The empirical analysis is carried out with applying panel data models to a panel of 42 Korean manufacturing industries for the period between 1991 and 2013. Empirical results show that an increase in the total amount of export(import) tended to increase(decrease) the number of employees in the manufacturing industries, with no significant effects on the average wage levels. This result maintains, irrespective of firm sizes. In addition, the results suggest that Korea’s export to and import from China tended to increase the number of employees in the manufacturing industries, with Korea’s export to China increasing the average wage levels. Changes in the estimation method may affect some results of the study, but do not support the allegation that the number of employees in the Korean manufacturing industries dropped due to a steady increase in the amount of import from China. The results provide empirical evidence on the view that Korea’s trade with China has led the Korea’s economic growth, and support the prediction that the Korea-China Free Trade Agreement will contribute to sustainable growth in the Korean manufacturing sector.