IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

The impact of economic geography on wages: Disentangling the channels of influence

  • Hering, Laura
  • Poncet, Sandra

This paper evaluates the role of economic geography in explaining regional wages in China. It investigates the extent to which market proximity can explain the evolution of wages, and through which channels. We construct a complete indicator of market access at the provincial level from data on domestic and international trade flows; this is introduced in a simultaneous-equations system to identify the direct and indirect effect of market access on wages. The estimation results for 29 Chinese provinces over 1995-2002 suggest that access to sources of demand is indeed an important factor shaping regional wage dynamics in China. We investigate three channels through which market access might influence wages beside direct transport-cost savings: export performance, and human and physical capital accumulation. A fair share of benefits seems to come from enhanced export performance and greater accumulation of physical capital. The main source of influence of market access remains direct transport costs.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S1043-951X(08)00064-3
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 20 (2009)
Issue (Month): 1 (March)
Pages: 1-14

as
in new window

Handle: RePEc:eee:chieco:v:20:y:2009:i:1:p:1-14
Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Stephen Redding & Anthony J. Venables, 2001. "Economic geography and international inequality," LSE Research Online Documents on Economics 3714, London School of Economics and Political Science, LSE Library.
  2. Head, Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers.
  3. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
  4. Laura Hering & Sandra Poncet, 2010. "Income Per Capita Inequality in China: The Role of Economic Geography and Spatial Interactions," The World Economy, Wiley Blackwell, vol. 33(5), pages 655-679, 05.
  5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  6. Laura Hering & Sandra Poncet, 2010. "Market access and individual wages: evidence from China," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633785, HAL.
  7. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
  8. Poncet, Sandra, 2003. "Measuring Chinese domestic and international integration," China Economic Review, Elsevier, vol. 14(1), pages 1-21.
  9. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
  10. Stephen Redding & Peter K. Schott, 2003. "Distance, Skill Deepening and Development: Will Peripheral Countries Ever Get Rich?," NBER Working Papers 9447, National Bureau of Economic Research, Inc.
  11. Giuseppe De Arcangelis & Giordano Mion, 2002. "Spatial Externalities and Empirical Analysis: The case of Italy," SERIES 0006, Dipartimento di Scienze economiche e metodi matematici - Università di Bari, revised Jan 2002.
  12. Sala-i-martin, X. & Barro, R.J., 1995. "technological Diffusion, Convergence and Growth," Papers 735, Yale - Economic Growth Center.
  13. Keith Head & Thierry Mayer, 2006. "Regional Wage and Employment Responses to Market Potential in the EU," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00267437, HAL.
  14. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
  15. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  16. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, March.
  17. Sebastian Edwards, 1991. "Trade Orientation, Distortions and Growth in Developing Countries," NBER Working Papers 3716, National Bureau of Economic Research, Inc.
  18. Wacziarg, Romain & Spolaore, Enrico & Alesina, Alberto, 2000. "Economic Integration and Political Disintegration," Scholarly Articles 4553029, Harvard University Department of Economics.
  19. Erkel-Rousse, H. & Mirza, D., 2000. "Import Price-Elasticities : Reconsidering the Evidence," Papiers d'Economie Mathématique et Applications 2000.52, Université Panthéon-Sorbonne (Paris 1).
  20. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  21. Wing Thye Woo & Robert Feenstra & Wen Hai & Shunli Yao, 2003. "The U.S.-China Bilateral Trade Balance: It'S Size And Determinants," Working Papers 989, University of California, Davis, Department of Economics.
  22. José De Sousa & Sandra Poncet, 2011. "How are wages set in Beijing," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633752, HAL.
  23. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  24. De Bruyne, Karolien, 2009. "Explaining the Location of Economic Activity. Is there a Spatial Employment Structure in Belgium?," Working Papers 2009/28, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  25. repec:hhs:iuiwop:430 is not listed on IDEAS
  26. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany," Journal of Regional Science, Wiley Blackwell, vol. 44(3), pages 437-466.
  27. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  28. Meng, Xin & Gregory, Bob & Wang, Youjuan, 2005. "Poverty, Inequality, and Growth in Urban China, 1986-2000," IZA Discussion Papers 1452, Institute for the Study of Labor (IZA).
  29. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
  30. Alyson C. Ma, 2006. "Geographical Location of Foreign Direct Investment and Wage Inequality in China," The World Economy, Wiley Blackwell, vol. 29(8), pages 1031-1055, 08.
  31. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  32. Redding, Stephen & Venables, Anthony J., 2003. "South-East Asian export performance: external market access and internal supply capacity," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 404-431, December.
  33. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October.
  34. Jesus Lopez-Rodriguez & J. Andres Faina, 2006. "Does distance matter for determining regional income in the European Union? An approach through the market potential concept," Applied Economics Letters, Taylor & Francis Journals, vol. 13(6), pages 385-390.
  35. J. Andres Faina & J. Lopez-Rodriguez, 2006. "Market access and human capital accumulation: the European Union case," Applied Economics Letters, Taylor & Francis Journals, vol. 13(9), pages 563-567.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:20:y:2009:i:1:p:1-14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.