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Relative Prices and Wages in China: Evidence from a Panel of Provincial Data


Author Info

  • Nagayasu, Jun

    (University of Tsukuba)

  • Liu, Ying

    (ShanDong University)


Using Chinese provincial data, we examine the relationship between relative prices and wages, which can be derived on the basis of the Balassa-Samuelson theorem. First, considering cross sectional dependency in our data, we implement recently developed panel unit root tests. We report strong evidence of non-divergence in the prices of provinces vis-a-vis those of the benchmark (Beijing) and weaker evidence in wages. In the latter case, the results seem sector-specific, suggesting that wages in some industries are not following the trend in Beijing. Secondly, using sectorlevel data, we find evidence that relative prices can be explained by relative wages.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 23 (2008)
Issue (Month): ()
Pages: 183-203

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Handle: RePEc:ris:integr:0431

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Related research

Keywords: Purchasing power parity; the Balassa-Samuelson effect; panel unit root tests; convergence speed; Chinese provincial data; bootstrap methods;

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Cited by:
  1. Nagayasu, Jun, 2009. "Regional Inflation in China," MPRA Paper 24722, University Library of Munich, Germany.


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