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Industrial Agglomeration and Wage Inequality in China

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  • 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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Bibliographic 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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Keywords: New Economic Geography; Wage Inequality; Elasticity of Substitution;

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  1. 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.
  2. Catin, Maurice & Luo, Xubei & Van Huffel, Christophe, 2005. "Openness, industrialization, and geographic concentration of activities in China," Policy Research Working Paper Series 3706, The World Bank.
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  8. Jang C. Jin, 2004. "On the Relationship Between Openness and Growth in China: Evidence from Provincial Time Series Data," The World Economy, Wiley Blackwell, vol. 27(10), pages 1571-1582, November.
  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.
  10. Anderson, Kym & Huang, Jikun & Ianchovichina, Elena, 2003. "Long-run impacts of China's WTO accession on farm-nonfarm income inequality and rural poverty," Policy Research Working Paper Series 3052, The World Bank.
  11. H Garretsen & M. Schramm & S. Brakman, 2003. "The Strategic Bombing of German Cities during World War II and its Impact for Germany," Working Papers 03-08, Utrecht School of Economics.
  12. Tuan, Chyau & Ng, Linda F. Y., 2004. "Manufacturing agglomeration as incentives to Asian FDI in China after WTO," Journal of Asian Economics, Elsevier, vol. 15(4), pages 673-693, August.
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Cited by:
  1. Anwar, Sajid & Sun, Sizhong, 2012. "Trade liberalisation, market competition and wage inequality in China's manufacturing sector," Economic Modelling, Elsevier, vol. 29(4), pages 1268-1277.

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