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Market access and individual wages: evidence from China

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  • Laura Hering

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Sandra Poncet

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

We consider the effect of geography on wages using individual data from 56 Chinese cities. We present a simple new economic geography model that links wages to individual characteristics and market access. The latter is calculated as a transport cost weighted sum of surrounding locations' market capacity. After controlling for individual skills and local factor endowments, we find that a significant fraction of the interindividual differences in returns to labor can be explained by the geography of market access. We further find greater wage sensitivity to market access for highly skilled workers and for workers in private and, particularly, foreign-owned firms.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00633785.

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Date of creation: 2010
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Publication status: Published, Review of Economics and Statistics, 2010, 92, 1, 145-159
Handle: RePEc:hal:cesptp:hal-00633785

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  1. Stephen Redding & Peter K Schott, 2003. "Distance, skill deepening and development : will peripheral countries ever get rich?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 207, London School of Economics and Political Science, LSE Library.
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  3. Mary Amiti & Lisa Cameron, 2007. "Economic Geography and Wages," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 15-29, February.
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  8. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, Elsevier, vol. 32(3), pages 385-397, August.
  9. Mion, Giordano & Naticchioni, Paolo, 2005. "Urbanization Externalities, Market Potential and Spatial Sorting of Skills and Firms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5172, C.E.P.R. Discussion Papers.
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