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Market access and the heterogeneous effect of shocks on wages: Evidence from Chinese cities

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  • Moreno-Monroy, Ana Isabel

Abstract

New Economic Geography (NEG) models predict that locations with market access advantages have higher wages and larger labour inflows. Using comprehensive prefecture†city level data for China, the study estimates a wage equation derived from a NEG model. The results support the NEG explanation for wage disparities across cities. An application of shock experiments on 230 prefecture†cities in China shows that the average effect of income changes differs greatly across locations. In particular, income shocks generated in core cities have a higher average impact in the rest of the country than shocks generated elsewhere.

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Handle: RePEc:eee:paresc:v:90:y:2011:i:1:p:9-26
DOI: 10.1111/j.1435-5957.2010.00319.x
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JEL classification:

  • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
  • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
  • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
  • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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