Cost Competitiveness Comparisons and Convergence in China

Lili Kang and Fei Peng

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines provincial disparities and convergence of sectors in China from a labour cost perspective. We find that the provinces in the Northeast and Coastal regions have strong advantages in the manufacturing sector, while the Primary sector, Construction and Real estate sectors have better cost competitiveness in the Interior and West regions. The decrease of relative unit labour cost (RULC) is mainly due to the faster growth rates of relative labour productivity (RLP) than the growth rate of relative nominal labour costs (RNLC) in most cases. A decomposition analysis shows that there are much more cost competitiveness gains, as well as relative decrease of nominal labour costs and labour productivity improvement during the period 1978-1995 than the years afterwards. We find the fast convergence of RULC is consistent with the fast converging RLP among provinces with static wages, suggesting the importance of institutional factors such as rigid wage setting in Chinese labour markets.

Keywords: Unit Labour Cost; Regional Development Planning; China (search for similar items in EconPapers)
JEL-codes: J30 R58 (search for similar items in EconPapers)
Date: 2012-11-05
New Economics Papers: this item is included in nep-eff, nep-geo, nep-tra and nep-ure
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Related works:
Journal Article: Cost Competitiveness Comparisons and Convergence in China (2013)
Journal Article: Cost Competitiveness Comparisons and Convergence in China (2013)
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