IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Productivity As If Space Mattered: An Application to Factor Markets Across China

  • Wenya Cheng
  • John Morrow
  • Kitjawat Tacharoen

Although firms may face radically different production conditions, this dimension of firm heterogeneity is often overlooked. We model input demand across local factor markets, explicitly considering search costs which explain why firms care about both the price and availability of inputs. The model is estimated by combining firm and population census data. The results quantify the role of regional factor markets in firm productivity and location. Considering modern China as a large country with substantial regional variation, we find within industry interquartile labor costs vary by 30-80%, leading to 2-17% interquartile differences in TFP. These estimates imply that in general equilibrium, homogenization of labor markets would lead to a 1.63% increase in real income. Furthermore, favorably endowed regions attract more economic activity, providing new insights into within-country comparative advantage and specialization.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/economics/discussionpapers/EDP-1320.pdf
Download Restriction: no

Paper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 1320.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:man:sespap:1320
Contact details of provider: Postal: Manchester M13 9PL
Phone: (0)161 275 4868
Fax: (0)161 275 4812
Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/
More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Elhanan Helpman & Oleg Itshoki & Stephen Redding, 2009. "Inequality and unemployment in a global economy," LSE Research Online Documents on Economics 25501, London School of Economics and Political Science, LSE Library.
  2. Iranzo, Susana & Schivardi, Fabiano & Tosetti, Elisa, 2006. "Skill Dispersion and Firm Productivity: An Analysis with Employer-Employee Matched Data," CEPR Discussion Papers 5539, C.E.P.R. Discussion Papers.
  3. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, 01.
  4. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Misallocation and Manufacturing TFP in China and India," Discussion Papers 07-006, Stanford Institute for Economic Policy Research.
  5. Grossmann, G.M. & Maggi, G., 1998. "Diversity and Trade," Papers 192, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Nick Bloom & Mark Schankerman & John Van Reenen, 2005. "Identifying technology spillovers and product market rivalry," LSE Research Online Documents on Economics 780, London School of Economics and Political Science, LSE Library.
  7. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2004. "Comparative Advantage and Heterogeneous Firms," NBER Working Papers 10668, National Bureau of Economic Research, Inc.
  8. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  9. Smarzynska, Beata K., 2002. "Does foreign direct investment increase the productivity of domestic firms : in search of spillovers through backward linkages," Policy Research Working Paper Series 2923, The World Bank.
  10. Chad Syverson, 2001. "Market Structure and Productivity: A Concrete Example," Working Papers 01-06, Center for Economic Studies, U.S. Census Bureau.
  11. Parrotta, Pierpaolo & Pozzoli, Dario & Pytlikova, Mariola, 2012. "Does Labor Diversity Affect Firm Productivity?," IZA Discussion Papers 6973, Institute for the Study of Labor (IZA).
  12. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," NBER Working Papers 12216, National Bureau of Economic Research, Inc.
  13. John Abowd & John Haltiwanger & Ron Jarmin & Julia Lane & Paul Lengermann & Kristin McCue & Kevin McKinney & Kristin Sandusky, 2002. "The Relation among Human Capital, Productivity and Market Value: Building Up from Micro Evidence," Longitudinal Employer-Household Dynamics Technical Papers 2002-14, Center for Economic Studies, U.S. Census Bureau.
  14. Jeremy T. Fox & Valérie Smeets, 2011. "Does Input Quality Drive Measured Differences In Firm Productivity?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(4), pages 961-989, November.
  15. Henry Overman & Diego Puga, 2008. "Labour Pooling as a Source of Agglomeration: An Empirical Investigation," SERC Discussion Papers 0006, Spatial Economics Research Centre, LSE.
  16. Doireann Fitzgerald & Juan Carlos Hallak, 2002. "Specialization, Factor Accumulation and Development," Working Papers 488, Research Seminar in International Economics, University of Michigan.
  17. Yue Ma & Heiwai Tang & Yifan Zhang, 2011. "Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters," Development Working Papers 324, Centro Studi Luca d\'Agliano, University of Milano, revised 27 Dec 2011.
  18. Ali Hortaçsu & Chad Syverson, 2007. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Journal of Political Economy, University of Chicago Press, vol. 115, pages 250-301.
  19. Daniel M. Bernhofen & John C. Brown, 2011. "Testing the General Validity of the Heckscher-Ohlin Theorem: The Natural Experiment of Japan," CESifo Working Paper Series 3586, CESifo Group Munich.
  20. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  21. Luis Garicano & Paul Heaton, 2007. "Information technology, organization, and productivity in the public sector: evidence from police departments," LSE Research Online Documents on Economics 19686, London School of Economics and Political Science, LSE Library.
  22. Chow, Gregory C, 1993. "Capital Formation and Economic Growth in China," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 809-42, August.
  23. Pekka Ilmakunnas & Seija Ilmakunnas, 2011. "Diversity at the Workplace: Whom Does it Benefit?," De Economist, Springer, vol. 159(2), pages 223-255, June.
  24. Pedro S. Martins, 2008. "Dispersion in Wage Premiums and Firm Performance," Working Papers 8, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  25. Carol Corrado & John Haltiwanger & Daniel Sichel, 2005. "Introduction to "Measuring Capital in the New Economy"," NBER Chapters, in: Measuring Capital in the New Economy, pages 1-10 National Bureau of Economic Research, Inc.
  26. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2008. "Social Connections and Incentives in the Workplace: Evidence from Personnel Data," IZA Discussion Papers 3917, Institute for the Study of Labor (IZA).
  27. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  28. Jeffrey R. Bernstein & David E. Weinstein, 1998. "Do Endowments Predict the Location of Production? Evidence from National and International Data," NBER Working Papers 6815, National Bureau of Economic Research, Inc.
  29. Matilde Bombardini & Giovanni Gallipoli & German Pupato, 2012. "Skill Dispersion and Trade Flows," American Economic Review, American Economic Association, vol. 102(5), pages 2327-48, August.
  30. Fleisher, Belton M. & Wang, Xiaojun, 2004. "Skill differentials, return to schooling, and market segmentation in a transition economy: the case of Mainland China," Journal of Development Economics, Elsevier, vol. 73(1), pages 315-328, February.
  31. Ali Hortacsu & Chad Syverson, 2009. "Why Do Firms Own Production Chains?," Working Papers 09-31, Center for Economic Studies, U.S. Census Bureau.
  32. Chad Syverson, 2010. "What Determines Productivity?," NBER Working Papers 15712, National Bureau of Economic Research, Inc.
  33. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 379-436.
  34. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
  35. George J. Borjas, 2009. "The Analytics of the Wage Effect of Immigration," NBER Working Papers 14796, National Bureau of Economic Research, Inc.
  36. Carol Corrado & John Haltiwanger & Dan Sichel, 2005. "Measuring Capital in the New Economy," NBER Books, National Bureau of Economic Research, Inc, number corr05-1, October.
  37. Corrado, Carol & Haltiwanger, John & Sichel, Daniel (ed.), 2005. "Measuring Capital in the New Economy," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226116129, May.
  38. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
  39. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2012. "Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity," Working Papers 12-32, Center for Economic Studies, U.S. Census Bureau.
  40. Farzana Afridi & Sherry Xin Li & Yufei Ren, 2010. "Social Identity and Inequality: The Impact of China's Hokou System," Working Papers id:3003, eSocialSciences.
  41. Petia Topalova, 2010. "Factor Immobility and Regional Impacts of Trade Liberalization Evidenceon Poverty From India," IMF Working Papers 10/218, International Monetary Fund.
  42. Bowles, Samuel, 1970. "Aggregation of Labor Inputs in the Economics of Growth and Planning: Experiments with a Two-Level CES Function," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 68-81, Jan.-Feb..
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:man:sespap:1320. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marianne Sensier)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.