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Industrial Agglomeration and Wage Inequality in China

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Author Info
Li, Yao

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Abstract

This paper estimates nonlinear structural wage equations derived from NEG model with data on 327 cities in China. The estimation results show that the variation of wage level across cities in China is associated with proximity to large markets. The estimated elasticity of substitution of China is smaller than those of the other countries studied in previous research. It indicates that with the same increase of sub-regional market size, China may suffer more serious regional inequality problems. My estimation shows that although increased agglomeration can increase each city’s wage level, it may also increase the wage gap between large and small cities.

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File URL: http://mpra.ub.uni-muenchen.de/11426/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11426.

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Date of creation: May 2008
Date of revision: Oct 2008
Handle: RePEc:pra:mprapa:11426

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Related research
Keywords: New Economic Geography; Wage Inequality; Elasticity of Substitution;

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Find related papers by JEL classification:
O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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  1. S.Brakman & H.Garretsen & Joeri Gorter & Albert van der Horst & Marc Schramm, 2005. "New economic geography, empirics, and regional policy," CPB Special Publications 56, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
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  2. Linda F. Y. Ng & Chyau Tuan, 2001. "FDI Promotion Policy in China: Governance and Effectiveness," The World Economy, Blackwell Publishing, vol. 24(8), pages 1051-1074, 09. [Downloadable!] (restricted)
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  4. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November. [Downloadable!] (restricted)
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  5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  6. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September. [Downloadable!] (restricted)
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  9. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June. [Downloadable!] (restricted)
  10. Cécile Batisse & Sandra Poncet, 2004. "Protectionism and Industry Location in Chinese Provinces," Journal of Chinese Economic and Business Studies, Taylor and Francis Journals, vol. 2(2), pages 133-154, May. [Downloadable!] (restricted)
  11. Chun-Chung Au & Vernon Henderson, 2002. "How Migration Restrictions Limit Agglomeration and Productivity in China," NBER Working Papers 8707, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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