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Market access and individual wages: evidence from China

  • Laura Hering


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Sandra Poncet


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

We consider the effect of geography on wages using individual data from 56 Chinese cities. We present a simple new economic geography model that links wages to individual characteristics and market access. The latter is calculated as a transport cost weighted sum of surrounding locations' market capacity. After controlling for individual skills and local factor endowments, we find that a significant fraction of the interindividual differences in returns to labor can be explained by the geography of market access. We further find greater wage sensitivity to market access for highly skilled workers and for workers in private and, particularly, foreign-owned firms.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00633785.

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Date of creation: 2010
Date of revision:
Publication status: Published in Review of Economics and Statistics, Massachusetts Institute of Technology Press (MIT Press), 2010, 92 (1), pp.145-159. <10.1162/rest.2009.11418>
Handle: RePEc:hal:cesptp:hal-00633785
DOI: 10.1162/rest.2009.11418
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