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Industrial Agglomeration and Wage Inequality in China


  • Li, Yao


This paper estimates nonlinear structural wage equations derived from NEG model with data on 327 cities in China. The estimation results show that the variation of wage level across cities in China is associated with proximity to large markets. The estimated elasticity of substitution of China is smaller than those of the other countries studied in previous research. It indicates that with the same increase of sub-regional market size, China may suffer more serious regional inequality problems. My estimation shows that although increased agglomeration can increase each city’s wage level, it may also increase the wage gap between large and small cities.

Suggested Citation

  • Li, Yao, 2008. "Industrial Agglomeration and Wage Inequality in China," MPRA Paper 11426, University Library of Munich, Germany, revised Oct 2008.
  • Handle: RePEc:pra:mprapa:11426

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    Cited by:

    1. Peter J. Rimmer & Howard Dick, 2010. "Appropriate Economic Space for Transnational Infrastructural Projects: Gateways, Multimodal Corridors, and Special Economic Zones," Working Papers id:2946, eSocialSciences.
    2. Modestino, Alicia Sasser & Shoag, Daniel & Ballance, Joshua, 2015. "Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful?," Working Paper Series rwp15-013, Harvard University, John F. Kennedy School of Government.
    3. Anwar, Sajid & Sun, Sizhong, 2012. "Trade liberalisation, market competition and wage inequality in China's manufacturing sector," Economic Modelling, Elsevier, vol. 29(4), pages 1268-1277.

    More about this item


    New Economic Geography; Wage Inequality; Elasticity of Substitution;

    JEL classification:

    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • 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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