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Relative Prices and Wages in China: Evidence from a Panel of Provincial Data

Listed author(s):
  • Nagayasu, Jun


    (University of Tsukuba)

  • Liu, Ying

    (ShanDong University)

Using Chinese provincial data, we examine the relationship between relative prices and wages, which can be derived on the basis of the Balassa-Samuelson theorem. First, considering cross sectional dependency in our data, we implement recently developed panel unit root tests. We report strong evidence of non-divergence in the prices of provinces vis-a-vis those of the benchmark (Beijing) and weaker evidence in wages. In the latter case, the results seem sector-specific, suggesting that wages in some industries are not following the trend in Beijing. Secondly, using sectorlevel data, we find evidence that relative prices can be explained by relative wages.

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Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 23 (2008)
Issue (Month): ()
Pages: 183-203

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Handle: RePEc:ris:integr:0431
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