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Cost Competitiveness Comparisons and Convergence in China

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  • Kang, Lili
  • Peng, Fei

Abstract

This paper examines provincial disparities and convergence of sectors in China from a labour cost perspective. We find that the provinces in the Northeast and Coastal regions have strong advantages in the manufacturing sector, while the Primary sector, Construction and Real estate sectors have better cost competitiveness in the Interior and West regions. The decrease of relative unit labour cost (RULC) is mainly due to the faster growth rates of relative labour productivity (RLP) than the growth rate of relative nominal labour costs (RNLC) in most cases. A decomposition analysis shows that there are much more cost competitiveness gains, as well as relative decrease of nominal labour costs and labour productivity improvement during the period 1978-1995 than the years afterwards. We find the fast convergence of RULC is consistent with the fast converging RLP among provinces with static wages, suggesting the importance of institutional factors such as rigid wage setting in Chinese labour markets.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42449.

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Date of creation: 05 Nov 2012
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Handle: RePEc:pra:mprapa:42449

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Keywords: Unit Labour Cost; Regional Development Planning; China;

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  1. Fleisher, Belton M. & Li, Haizheng & Zhao, Min Qiang, 2008. "Human Capital, Economic Growth, and Regional Inequality in China," IZA Discussion Papers 3576, Institute for the Study of Labor (IZA).
  2. Vivian W. Chen & Harry X. Wu & Bart van Ark, 2009. "More Costly Or More Productive? Measuring Changes In Competitiveness In Manufacturing Across Regions In China," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 55(s1), pages 514-537, 07.
  3. Ark, Bart van & Stuivenwold, Edwin & Ypma, Gerard, 2005. "Unit labour costs, productivity and international competitiveness," GGDC Research Memorandum, Groningen Growth and Development Centre, University of Groningen 200580, Groningen Growth and Development Centre, University of Groningen.
  4. Adam Szirmai & Ruoen Ren & Manyin Bai, 2005. "Chinese Manufacturing Performance in Comparative Perspective, 1980-2002," Working Papers, Economic Growth Center, Yale University 920, Economic Growth Center, Yale University.
  5. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, vol. 12(2), pages 171-174, June.
  6. Appleton, Simon & Knight, John & Song, Lina & Xia, Qingjie, 2002. "Labor retrenchment in China: Determinants and consequences," China Economic Review, Elsevier, Elsevier, vol. 13(2-3), pages 252-275.
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Cited by:
  1. Françoise Lemoine & Grégoire Mayo & Sandra Poncet & Deniz Ünal, 2014. "The Geographic Pattern of China's Growth and Convergence within Industry," Working Papers, CEPII research center 2014-04, CEPII research center.

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