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

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  • 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)

Abstract

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.

Suggested Citation

  • Laura Hering & Sandra Poncet, 2009. "The impact of economic geography on wages: Disentangling the channels of influence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633816, HAL.
  • Handle: RePEc:hal:cesptp:hal-00633816 DOI: 10.1016/j.chieco.2008.08.002 Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00633816
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Pierre-Philippe Combes & Sylvie Démurger & Shi Li, 2013. "Urbanisation and Migration Externalities in China," Working Papers 1303, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    2. Rafael Alvarado & Miguel Atienza, 2014. "The role of market access and human capital in regional wage disparities: Empirical evidence for Ecuador," Documentos de Trabajo en Economia y Ciencia Regional 50, Universidad Catolica del Norte, Chile, Department of Economics, revised Mar 2014.
    3. repec:esx:essedp:729 is not listed on IDEAS
    4. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779 Elsevier.
    5. Antoine Berthou & Lionel Fontagné, 2008. "The Euro Effects on the Firm and Product-Level Trade Margins: Evidence from France," Working Papers 2008-21, CEPII research center.
    6. Cardoso-Vargas, Carlos-Enrique, 2016. "Does the Type of Neighbor Matter?: Evidence of heterogeneous Export Spillovers on Domestic Companies in Mexico," MPRA Paper 70212, University Library of Munich, Germany.
    7. Reinhold Kosfeld & Hans-Friedrich Eckey, 2010. "Market access, regional price level and wage disparities: the German case," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 30(2), pages 105-128, September.
    8. Joachim Jarreau & Sandra Poncet, 2009. "Export Sophistication and Economic Performance: Evidence from Chinese Provinces," Working Papers 2009-34, CEPII research center.
    9. Cardoso-Vargas, Carlos, 2015. "Potencial de mercado y desigualdad salarial, evidencia para México
      [Market potential and wage inequality, evidence for Mexico]
      ," MPRA Paper 68424, University Library of Munich, Germany, revised 05 Nov 2015.
    10. 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.
    11. Bai, Chong-En & Ma, Hong & Pan, Wenqing, 2012. "Spatial spillover and regional economic growth in China," China Economic Review, Elsevier, vol. 23(4), pages 982-990.
    12. Christoph Hammer & Aurélien Fichet de Clairfontaine, 2016. "Trade Costs and Income in European Regions," Department of Economics Working Papers wuwp220, Vienna University of Economics and Business, Department of Economics.
    13. Cardoso-Vargas, Carlos, 2015. "Potencial de mercado y desigualdad salarial, evidencia para México
      [Market potential and wage inequality, evidence for Mexico]
      ," MPRA Paper 69696, University Library of Munich, Germany, revised 05 Nov 2015.

    More about this item

    Keywords

    Economic geography; Wage; Trade openness; Capital accumulation; China;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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