The Impact of Economic Geography on Wages: Disentangling the Channels of Influence

Laura Hering and Sandra Poncet ()

Working Papers from CEPII research center

Abstract: This paper evaluates the role of economic geography in explaining regional wages in China. It investigates the extent to which market proximity can explain the evolution of wages, and through which channels. We construct a complete indicator of market access at the provincial level from data on domestic and international trade flows; this is introduced in a simultaneous-equations system to identify the direct and indirect effect of market access on wages. The estimation results for 29 Chinese provinces over 1995-2002 suggest that access to sources of demand is indeed an important factor shaping regional wage dynamics in China. We investigate three channels through which market access might influence wages beside direct transport-cost savings: export performance, and human and physical capital accumulation. A fair share of benefits seems to come from enhanced export performance and greater accumulation of physical capital. The main source of influence of market access remains direct transport costs.

Keywords: Economic geography; International trade; Wage; Trade openess; Capital accumulation; China (search for similar items in EconPapers)
JEL-codes: F12 F15 R11 R12 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-cna, nep-geo, nep-int, nep-lab, nep-tra and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The impact of economic geography on wages: Disentangling the channels of influence (2009)
Working Paper: The impact of economic geography on wages: Disentangling the channels of influence (2009)
Working Paper: The impact of economic geography on wages: Disentangling the channels of influence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2008-20

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