Over the last fifteen years, China’s export performance has been phenomenal but some observers assert that this situation is temporary due to rising labor costs. However, large migration across provinces may increase competition on the labor market of export-intensive provinces and allow firms to keep low wages for many years. This paper attempts to shed some light on this debate over wage dynamics in China. We investigate the respective importance of the upward push of world demand and the downward pressure of migration. This investigation is conducted on a sample of 29 Chinese provinces between 1997 and 2004. We find, holding other factors fixed, that provincial wages increase by about 17 percent per year, due to common trends possibly like total factor productivity growth and national increase in prices. Our results show that besides this general trend, market access and internal migration have statistically and economically significant effects on the provincial wage level but of much less importance. We estimate that on average over the 7 year period of our sample, more intense internal migration has slowed down wage growth by 2 percent per year. The wage increasing impact of market access is three times smaller in magnitude.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.