Spatial disparity of skill premium in China: The role of financial intermediation development

Tat-kei Lai and Luhang Wang

No 6/2022, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: In China, the relative wages of high-skilled and low-skilled workers display huge variation across different regions. We examine whether financial intermediation development can explain such variation. Conceptually, better-developed financial intermediation helps financially-constrained firms raise new capital, which is usually skilledbiased, resulting in an increased demand for skilled labor and skill premium. Using a cross-section of workers from the 1% Population Survey of 2005, we find consistent evidence; besides, the relationship is stronger among workers in industries with higher capital-skill complementarity and in non-state-owned enterprises. Overall, our results suggest that the financial market plays a role in explaining skill premium in China.

Keywords: Financial intermediation; Misallocation; Skill premium; China (search for similar items in EconPapers)
JEL-codes: J24 J31 O11 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cna, nep-fdg and nep-ure
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Journal Article: Spatial disparity of skill premium in China: The role of financial intermediation development (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2022_006

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