Chapter

International Trade, Location, and Wage Inequality in China

Ravi Kanbur and Anthony J. Venables

in Spatial Inequality and Development

Published in print February 2005 | ISBN: 9780199278633
Published online April 2005 | e-ISBN: 9780191602191 | DOI: http://dx.doi.org/10.1093/0199278636.003.0011

Series: WIDER Studies in Development Economics

 International Trade, Location, and Wage Inequality in China

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Models of economic geography predict that transportation costs directly affect demand for goods and the supply of intermediate inputs. One of the reasons that international trade is concentrated in the coastal provinces of China is that they have lower transportation costs in transporting goods to other countries than do provinces in the interior. Examines the relationship between the provincial wage rate and each province’s access to international markets, and to suppliers of intermediate inputs. A gravity equation is first estimated to construct these ‘market access’ and ‘supplier access’ variables. In the second stage, the effect of market access and supplier access on the wage rate is estimated. It is found that about one-quarter of the provincial wage differences in the coastal provinces and 15% of the wage differences in the interior provinces can be explained by these economic geography variables.

Keywords: China; regional disparities; trade; wage rates

Chapter.  11763 words.  Illustrated.

Subjects: Economic Development and Growth

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