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ID:
170102
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| Summary/Abstract |
New economic geography (NEG) models predict that costly transport and the spatial distribution of demand affect the profits firms can earn in different locations, leading to higher wages for workers employed in cities with better geographic access to markets. In light of the ongoing economic integration and market reforms that occurred in China after 1995, we use three waves of Chinese Household Income Project (CHIP) data to measure the extent to which the influence of market access on wages changed and affected wage dispersion across Chinese cities over the next 12 years. Employing the gravity-based method of Redding and Venables (2004) to calculate the market access available to firms located in each city, we test whether the elasticity of the wage with respect to local market access increased over time. We find that in all three years market access of the worker's location has a positive and significant influence on the wage. Consistent with extensive labor market reforms of the late 1990s, the estimated wage elasticity doubles between 1995 and 2002 and is stable thereafter. Our estimates indicate that wages of all workers become more responsive to market forces in a manner consistent with NEG predictions, both skilled and unskilled and those working for state as well as private enterprises. We also provide evidence that these results are not driven by omission of other forms of agglomeration or by selection bias. Estimated spatial differences in nominal wages are large: a worker moving from an inland location to the coast in 2007 would have doubled his or her nominal wage. Counterfactual analysis indicates that spatial differences in market access contribute to wage inequality, but less so over time.
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| 2 |
ID:
161581
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| Summary/Abstract |
This paper provides a survey of foreign investment activity in China's high‐technology manufacturing industry. In addition, we closely examine the relationship between industrial policy, foreign investment and China's high‐technology export success using the development of an indigenous integrated circuits industry as a case study. This paper finds that China's efforts to raise the productivity and innovative capacity of indigenous enterprises is consistent with rising domestic shares of high‐technology assets and profits. Nevertheless, foreign‐funded enterprises remain the source of most high‐technology manufactured exports, primarily from wholly foreign‐owned firms. In sum, despite indigenous development, Chinese high‐technology manufacturing and exports remain deeply tied to foreign investment.
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