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N° 2006-23 |
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| December 2006 |
| Market Access Impact on Individual Wage:
Evidence from China |
Laura Hering
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| We study the effect of geography and in particular of market access on wages by working
with individual data from 56 Chinese cities in 11 different provinces. By applying the theory
of the New Economic Geography on individual survey data, we contribute to the explanation
of growing disparities within the country, and even within provinces. We examine to what
extent proximity to markets can explain inter-individual wage heterogeneity and growing
wage disparities within Chinese provinces. Using a New Economic Geography style model,
we derive an econometric specification relating wages to market access. The latter is calculated
as a transport cost weighted sum of the surrounding locations’ market capacities. Based
on data from 1995 on around 10,000 Chinese workers, and after controlling for individual
skills and factor endowments, we find that a significant fraction of inter-individual differences
in terms of return to labor can be explained by the geography of access to markets.
Moreover, our study investigates whether the relationship between market access and wages
holds for all types of workers equally and shows that the magnitude of the impact depends
on the firm type and the level of qualification. |
Abstract |
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| Economic geography; international trade; regional integration; wage China;
inequality |
Keywords |
| F12; F15; R11; R12 |
JEL classification |
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