International capital flows, the domestic employment and wages: Perspective from China’s different provinces

Purpose-The purpose of this paper is to explore in depth the impact and transmission mechanism of different international capital flows on domestic employment and wages in China within a systematic framework; also to reveal whether the empirical results can confirm the basic model inferences. Design/methodology/approach-Using dynamic economic model and empirical experiment, this study designs and conducts the analysis within a systematic framework. The authors acquire the needed and credible empirical data. Findings-The international capital inflows will increase the average wage level, and the international capital outflows will significantly reduce the level of domestic wages. The unofficially recorded capital flows would appear negatively related to the domestic wages. Due to the complexities of relevant elements, the impact of different international capital flows on domestic employment is of insignificance. It is noteworthy that the impact of international capital flows on the average wage changes of different provinces will tend to converge to a certain extent. Practical implications-The results have reflected that the capital flows between the different provinces have no obvious frictions and barriers. Originality/value-The paper explores in depth the impact and transmission mechanism of different international capital flows on domestic employment and wages within a systematic framework. The empirical analysis related to the China different provinces is an exploratory experiment.