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Persistence of Regional Inequality in China


  • Candelaria, Christopher

    (Stanford University)

  • Daly, Mary C.

    () (Federal Reserve Bank of San Francisco)

  • Hale, Galina

    () (Federal Reserve Bank of San Francisco)


Regional inequality in China appears to be persistent and even growing in the last two decades. We study potential explanations for this phenomenon. After making adjustments for the difference in the cost of living across provinces, we find that some of the inequality in real wages could be attributed to differences in quality of labor, industry composition, labor supply elasticities, and geographical location of provinces. These factors, taken together, explain about half of the cross-province real wage difference. Interestingly, we find that inter-province redistribution did not help offset regional inequality during our sample period. We also demonstrate that inter-province migration, while driven in part by levels and changes in wage differences across provinces, does not offset these differences. These results imply that cross-province labor market mobility in China is still limited, which contributes to the persistence of cross-province wage differences.

Suggested Citation

  • Candelaria, Christopher & Daly, Mary C. & Hale, Galina, 2013. "Persistence of Regional Inequality in China," Working Paper Series 2013-06, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfwp:2013-06
    DOI: 10.24148/wp2013-06

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    References listed on IDEAS

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    1. repec:bla:reviec:v:25:y:2017:i:4:p:774-798 is not listed on IDEAS
    2. L. An & C. Hu & Yong Tan, 2017. "Regional effects of export tax rebate on exporting firms: Evidence from China," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 774-798, September.

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    China; Wages; Labor market; Labor supply;

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