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Determining minimum wages in China: Do economic factors dominate?

Listed author(s):
  • Christian Dreger

    ()

  • Reinhold Kosfeld

    ()

  • Yanqun Zhang

Minimum wages may be an important instrument to reduce income inequality in a society and to promote socially inclusive economic growth. While higher minimum wages can support the Chinese transformation towards consumption driven growth, they can worsen the price competitiveness in export markets. As they differ throughout the country, this paper investigates their determinants at the regional level. In addition to a broad set of economic determinants, such as per capita income and consumption, consumer prices, unemployment and industrial structures, spatial effects are taken into account. They might arise for different reasons, including competition of local policymakers. The results show that the impact of economic variables declines, once spatial spillovers are considered. Although the minimum wage regulation pursues the relevance of economic factors in the determination of the appropriate levels, the actual development is largely driven by regional dependencies. As minimum wage standards set by local officials do not fully reflect the regional economic development, further reforms should be on the agenda.

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File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa16/Paper101_ChristianDreger.pdf
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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa16p101.

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Date of creation: Dec 2016
Handle: RePEc:wiw:wiwrsa:ersa16p101
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  1. Huang, Yi & Loungani, Prakash & Wang, Gewei, 2014. "Minimum wages and firm employment: evidence from China," Globalization and Monetary Policy Institute Working Paper 173, Federal Reserve Bank of Dallas.
  2. Chunbing Xing & Jianwei Xu, 2016. "Regional variation of the minimum wages in China," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-22, December.
  3. Chu-Chia S. Lin & Ivan Png, 2003. "Monitoring costs and the mode of international investment," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 261-274, July.
  4. Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
  5. Lin, Songhua, 2003. "International Trade, Location and Wage Inequality in China," WIDER Working Paper Series 061, World Institute for Development Economic Research (UNU-WIDER).
  6. Jinlan Ni & Guangxin Wang & Xianguo Yao, 2011. "Impact of Minimum Wages on Employment," Chinese Economy, M.E. Sharpe, Inc., vol. 44(1), pages 18-38, January.
  7. Holz, Carsten A., 2014. "Wage determination in China during the reform period," BOFIT Discussion Papers 13/2014, Bank of Finland, Institute for Economies in Transition.
  8. Jing Wang, 2012. "Minimum wage effects on employment and wages: dif-in-dif estimates from eastern China," International Journal of Manpower, Emerald Group Publishing, vol. 33(8), pages 860-876, November.
  9. Tony Fang & Carl Lin, 2015. "Minimum wages and employment in China," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-30, December.
  10. Sandra Poncet & Florian Mayneris & Tao Zhang, 2014. "The cleansing effect of minimum wage : Minimum wage rules, firm dynamics and aggregate productivity in China," Working Papers 2014-16, CEPII research center.
  11. Peng Jia, 2014. "Employment and Working Hour Effects of Minimum Wage Increase: Evidence from China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(2), pages 61-80, 03.
  12. Luc Anselin, 2003. "Spatial Externalities, Spatial Multipliers, And Spatial Econometrics," International Regional Science Review, , vol. 26(2), pages 153-166, April.
  13. Jing Wang & Morley Gunderson, 2011. "Minimum Wage Impacts In China: Estimates From A Prespecified Research Design, 2000–2007," Contemporary Economic Policy, Western Economic Association International, vol. 29(3), pages 392-406, 07.
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