Abstract

This book considers thefactors reallocation process induced by trade that most trade literature ignores，and relaxes the assumption of no cost in trade adjustment.It specifically considers three aspects：First，whether trade openness brings the reallocation of production factors in inter-industries and intra-industries at the same time？What are the positive economic effects of the induced reallocation of productive factors？Second，if the first question is answered affirmative，what kind of adjustment cost will the induced reallocation of production factors generate？What are the ways（or mechanisms）of these adjustment costs？Third，if we analyze the cost of trade adjustment and weigh the costs and benefits after trade liberalization，will trade openness bring positive economic effect？

In view of the above three aspects，using the data at various levels in China，the book draws the following basic conclusions：First，it is like Melitz（2003）from the perspective of enterprise heterogeneity.Based on China' s industry level data，the book finds that import competition caused by trade openness leads to a reallocation process of intra-industry and inter-industry.Among them，about 40% of the productivity effect of import competition can be explained by the induced positive intra-industry reallocation process.The reallocation of the induced factors among industries is not statistically significant.Moreover，the non-significant reallocation is not enough to offset the negative reallocation caused by other reasons.

Second，there is a clear functional relationship between the scale of government expenditure and the variables such as trade，risk and induced employment adjustment.Ignoring the induced employment adjustment variables will lead to a serious omission error.Considering the employment adjustment caused by trade liberalization，the traditional compensation hypothesis and the efficiency hypothesis do not explain the impact of trade openness on the scale of local government consumption expenditure.Trade liberalization led to negative employment adjustment，and the expected risk led to a positive employment adjustment，and its intensity exceeded the negative adjustment induced by trade.There is a significant difference in the impact mechanism of trade opening on the different expenditure items of local governments.The positive impact of lagged trade opening on the scale of real investment expenditure is essentially the impact of expected risk induced employment adjustment.But for the actual transfer payment scale of local government，the influence of the lagged trade opening is always not significant.The urbanization rate，the raising rate，the Wagner rule and the expected risk induced employment adjustment have always had significant positive effects

Third，with the deepening of open trade openness，especially the accession to the World Trade Organization（WTO），both from the macro and micro mechanism behind the appearance，our production factors and economic structure have undergone large-scale adjustment，and this change will naturally be reflected in the change in the share of labor income.By decomposing labor income share into internal labor share effect，added value effect，entry effect and exit effect that can fully reflect the dynamic change of enterprises，we can see that there are great differences in the changing direction of the different components of the share of labor income.The negative impact of trade openness on the overall change of labor income share is due to a comprehensive trade-off between the positive effect of the internal share effect and the exit effect，the negative impact of the added value effect and the entry effect.

Fourth，there is a significant monotonous increasing relationship between China' s per capita income and export specialization，indicating that China' s exports are becoming more and more concentrated in a few industries.Moreover，this trend is present in our country when the per capita income is far below the international demarcation point.This indicates that the development of China' s export specialization is far beyond its own development stage.In the future，if the per capita income exceeds a certain amount，the export will probably accelerate specialization.Special attention should be paid to such a way of export specialization，which may inhibit the long-term growth of the economy.This shows that the development of China' s export specialization is not enough to offset the cost of economic growth.