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The wage-productivity nexus in the world factory economy

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  • Dosi, Giovanni
  • Virgillito, Maria Enrica
  • Yu, Xiaodan

Abstract

This paper highlights new findings on the wage-productivity nexus in the World Factory Economy. After presenting the long-run macro-elasticity characterizing the phase of Chinese economic development since the eighties, we look at the wage-productivity nexus from a micro level perspective using a detailed firm-level dataset covering the period of ownership restructuring (1998–2007). A few results are quite robust under different estimation strategies. First, throughout the impressive Chinese economic miracle, elasticities of real wages to productivities – that is the ratios of rates of variation of the former to the latter – are always positive both under pooled and longitudinal estimates, both at firm- and sectoral-levels. Second, such elasticities are dramatically low, and falling in many distinct phases since the late seventies. That is, even in the manufacturing sector, the distribution of gains from the impressive labour productivity growth appears to be markedly uneven. Finally, third, governance institutions seem to matter a lot, with the majority of ownership types exhibiting firm-specific wage determination processes. The low elasticities of wages to productivity are plausibly the consequence of the massive flow of migrant workers from the rural areas to the coasts, somewhat resembling the early phase of the English Industrial Revolution with the pattern of enclosure in the country-side and massive migrations to the industrial towns.

Suggested Citation

  • Dosi, Giovanni & Virgillito, Maria Enrica & Yu, Xiaodan, 2020. "The wage-productivity nexus in the world factory economy," World Development, Elsevier, vol. 129(C).
  • Handle: RePEc:eee:wdevel:v:129:y:2020:i:c:s0305750x20300012
    DOI: 10.1016/j.worlddev.2020.104875
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    Cited by:

    1. Giovanni Dosi & Maria Enrica Virgillito & Xiaodan Yu, 2020. "Gains from trade or from catching-up? Value creation and distribution in the era of China's WTO accession," LEM Papers Series 2020/22, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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    More about this item

    Keywords

    Chinese industrialization; Gain-sharing; Labour market institutions; Labour productivity; Wage dispersion;
    All these keywords.

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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