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Provincial valuations of human capital in urban China, inter-regional inequality and the implicit value of a Guangdong hukou

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  • Jeffrey Zax

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Abstract

This paper assesses regional inequality in contemporary urban China by predicting earningss for individual workers in multiple provinces, comparing the province of maximum predicted earnings to the province of residence and assessing the predicted gains from relocation. The paper performs the same comparison for the U.S. in 1940 to provide an informal baseline comparison. Workers predicted relatively similar earningss in each of the nine U.S. Census divisions. Fewer than 10% of them predicted maximum earnings in divisions other than their home division that exceeded their predicted home division earnings by more than 20%. In contrast, 45% of Chinese urban workers in 1988 predicted maximum earnings in provinces outside their home province that exceeded their predicted home province earningss by more than 50%. The same was true of 54% of Chinese urban workers in 1995, 74% in 2002 and 57% in 2008. If all Chinese urban workers received the maximum of their predicted earningss across all provinces, rather than their predicted earnings in their home province, average earningss would approximately double, interpersonal inequality would decline by 40-50% and inter-provincial inequality would vanish. In all years, predicted earnings in Guangdong province have generally been greater than in any other province. The implicit value of the right to live in Guangdong was at least 26% of earnings in 1988 and 41% in 1995. It declined to about 7% of earnings in 2002 and 2008, but only because predicted earnings in Beijing and Shanghai had risen. The gaps between predicted earnings in Guangdong and other provinces in those years was similar to those in earlier years.

Suggested Citation

  • Jeffrey Zax, 2016. "Provincial valuations of human capital in urban China, inter-regional inequality and the implicit value of a Guangdong hukou," ERSA conference papers ersa16p693, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa16p693
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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa16/Paper693_JeffreyZax.pdf
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    References listed on IDEAS

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    Cited by:

    1. Yang, Guangliang & Li, Lixing & Fu, Shihe, 2017. "Do Rural Migrants Benefit from Labor Market Agglomeration Economies? Evidence from Chinese Cities," MPRA Paper 80713, University Library of Munich, Germany.

    More about this item

    Keywords

    Inequality; Returns to human capital; Migration; Law of one price;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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