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

Tat-Kei Lai and Luhang Wang
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Tat-Kei Lai: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique
Luhang Wang: Xiamen University

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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 (FID) can explain such variation. Conceptually, better-developed financial intermediation helps financially-constrained firms raise new capital, which is usually skill-biased, 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.

Date: 2024-06
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Published in China Economic Review, 2024, 85, pp.102173. ⟨10.1016/j.chieco.2024.102173⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04814677

DOI: 10.1016/j.chieco.2024.102173

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