Market Access and Individual Wages: Evidence from China

Laura Hering and Sandra Poncet ()

The Review of Economics and Statistics, 2010, vol. 92, issue 1, 145-159

Abstract: We consider the effect of geography on wages using individual data from 56 Chinese cities. We present a simple new economic geography model that links wages to individual characteristics and market access. The latter is calculated as a transport cost weighted sum of surrounding locations' market capacity. After controlling for individual skills and local factor endowments, we find that a significant fraction of the interindividual differences in returns to labor can be explained by the geography of market access. We further find greater wage sensitivity to market access for highly skilled workers and for workers in private and, particularly, foreign-owned firms. © 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2010
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