Persistence of regional inequality in China
AbstractRegional inequality in China appears to be persistent and even growing in the last two decades. We study potential explanations for this phenomenon. After making adjustments for the difference in the cost of living across provinces, we find that some of the inequality in real wages could be attributed to differences in quality of labor, industry composition, labor supply elasticities, and geographical location of provinces. These factors, taken together, explain about half of the cross-province real wage difference. Interestingly, we find that inter-province redistribution did not help offset regional inequality during our sample period. We also demonstrate that inter-province migration, while driven in part by levels and changes in wage differences across provinces, does not offset these differences. These results imply that cross-province labor market mobility in China is still limited, which contributes to the persistence of cross-province wage differences.
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2013-06.
Date of creation: 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-06 (All new papers)
- NEP-CNA-2013-04-06 (China)
- NEP-GEO-2013-04-06 (Economic Geography)
- NEP-LMA-2013-04-06 (Labor Markets - Supply, Demand, & Wages)
- NEP-LTV-2013-04-06 (Unemployment, Inequality & Poverty)
- NEP-TRA-2013-04-06 (Transition Economics)
- NEP-URE-2013-04-06 (Urban & Real Estate Economics)
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