The Relationship between City Size and Income in China

Xiangyu Ji () and Tianqing Zheng ()
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Xiangyu Ji: Durham University, Department of Economics
Tianqing Zheng: The University of Cambridge, Department of Land Economy

A chapter in Proceedings of the 2025 10th International Conference on Financial Innovation and Economic Development (ICFIED 2025), 2025, pp 791-802 from Springer

Abstract: Abstract Urbanization is a key driver of economic growth, and its effects on income have garnered significant academic attention, particularly in relation to agglomeration effects. This paper examines the relationship between urbanization and wages using data from the 2018 Chinese Family Panel Studies (CFPS). By employing nonlinear regression models, the analysis uncovers an inverted U-shaped relationship between city size and income, indicating that while urbanization initially boosts wages, beyond a certain point, congestion effects begin to outweigh agglomeration benefits, leading to diminished wage growth. Furthermore, a hierarchical linear model (HLM) is applied to account for the heterogeneity across provinces, with results showing that the base wage levels vary between provinces, although the effect of urbanization on wages remains consistent. The study also addresses the limitations of using provincial urbanization rates due to privacy constraints, offering suggestions for future research, such as incorporating city-specific corporate data to overcome this limitation. This research contributes to the understanding of urbanization’s economic impacts and provides insights into sustainable urban development strategies for China.

Keywords: Urbanization; Income; Inverse U-shape (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-702-1_81

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DOI: 10.2991/978-94-6463-702-1_81

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