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The impact of economic geography on wages: Disentangling the channels of influence

  • Laura Hering

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Sandra Poncet

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

This paper evaluates the role of economic geography in explaining regional wages in China. It investigates the extent to which market proximity can explain the evolution of wages, and through which channels. We construct a complete indicator of market access at the provincial level from data on domestic and international trade flows; this is introduced in a simultaneous-equations system to identify the direct and indirect effect of market access on wages. The estimation results for 29 Chinese provinces over 1995-2002 suggest that access to sources of demand is indeed an important factor shaping regionalwage dynamics in China. We investigate three channels through which market access might influence wages beside direct transport-cost savings: export performance, and human and physical capital accumulation. A fair share of benefits seems to come from enhanced export performance and greater accumulation of physical capital. The main source of influence of market access remains direct transport costs.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00633816.

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Date of creation: 2009
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Publication status: Published, China Economic Review, 2009, 20, 1, 1-14
Handle: RePEc:hal:cesptp:hal-00633816
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00633816
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  1. de Sousa, José & Poncet, Sandra, 2011. "How are wages set in Beijing?," Regional Science and Urban Economics, Elsevier, vol. 41(1), pages 9-19, January.
  2. Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  3. Laura Hering & Sandra Poncet, 2010. "Market access and individual wages: evidence from China," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633785, HAL.
  4. Wacziarg, Romain & Spolaore, Enrico & Alesina, Alberto, 2000. "Economic Integration and Political Disintegration," Scholarly Articles 4553029, Harvard University Department of Economics.
  5. Meng, Xin & Gregory, Bob & Wang, Youjuan, 2005. "Poverty, Inequality, and Growth in Urban China, 1986-2000," IZA Discussion Papers 1452, Institute for the Study of Labor (IZA).
  6. Robert C. Feenstra & Wen Hai & Wing T. Woo & Shunli Yao, . "The U.S.-China Bilateral Trade Balance: It'S Size And Determinants," Department of Economics 98-09, California Davis - Department of Economics.
  7. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October.
  8. J. Andres Faina & J. Lopez-Rodriguez, 2006. "Market access and human capital accumulation: the European Union case," Applied Economics Letters, Taylor & Francis Journals, vol. 13(9), pages 563-567.
  9. Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, vol. 39(1), pages 31-57, July.
  10. Laura Hering & Sandra Poncet, 2010. "Income Per Capita Inequality in China: The Role of Economic Geography and Spatial Interactions," The World Economy, Wiley Blackwell, vol. 33(5), pages 655-679, 05.
  11. De Bruyne, Karolien, 2009. "Explaining the Location of Economic Activity. Is there a Spatial Employment Structure in Belgium?," Working Papers 2009/28, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  12. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
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