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Industry specialization, diversification, churning, and unemployment in Chinese cities

  • Fu, Shihe
  • Dong, Xiaofang
  • Chai, Guojun

This paper studies how industry specialization, diversification, and churning affect unemployment rates in Chinese cities. Using a city level panel data set from 1997 to 2006, we find that the specialization of wholesale and retail industry can significantly decrease unemployment rate; however, specializing in finance industry increases unemployment rate. In contrast to the evidence from developed countries, industry diversity is positively and significantly associated with unemployment rates in Chinese cities, possibly due to the higher degree of industry churning during the sample period. We also find that urban economic growth, market maturity measured by the proportion of private sector employment, and human capital can decrease unemployment rate. Industry diversity does not stabilize unemployment; wholesale and retail industry increases unemployment fluctuations; but market maturity and human capital stabilize unemployment.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15339.

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Date of creation: May 2008
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Handle: RePEc:pra:mprapa:15339
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  1. Li Gan & Qi Li, 2004. "Efficiency of Thin and Thick Markets," NBER Working Papers 10815, National Bureau of Economic Research, Inc.
  2. Duranton, Gilles & Puga, Diego, 1999. "Diversity and Specialization in Cities: Why, Where and When Does It Matter?," CEPR Discussion Papers 2256, C.E.P.R. Discussion Papers.
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  13. Barkume, Anthony J., 1982. "Differentiating employment prospects by industry and returns to job search in metropolitan areas," Journal of Urban Economics, Elsevier, vol. 12(1), pages 68-84, July.
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  17. Simon, Curtis J, 1988. "Frictional Unemployment and the Role of Industrial Diversity," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 715-28, November.
  18. Attaran, Mohsen, 1986. "Industrial Diversity and Economic Performance in U.S. Areas," The Annals of Regional Science, Springer, vol. 20(2), pages 44-54, July.
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