Relative Prices and Wages in China: Evidence from a Panel of Provincial Data
AbstractUsing 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 InfoArticle provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.
Volume (Year): 23 (2008)
Issue (Month): ()
Purchasing power parity; the Balassa-Samuelson effect; panel unit root tests; convergence speed; Chinese provincial data; bootstrap methods;
Find related papers by JEL classification:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- F30 - International Economics - - International Finance - - - General
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- Nagayasu, Jun, 2009. "Regional Inflation in China," MPRA Paper 24722, University Library of Munich, Germany.
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