The geography of the wages: Chinese cities 1989 and 1997

Abstract

Improving national average income and reducing regional income inequality often serve as dual goals of economic development in a country. After over twenty years of economic reforms, China has been fairly successful in achieving the first goal, but failed in the second. This paper uses recent data with a sharper resolution to examine the variation of average wages across Chinese cities 1989–1997. Widening wage inequalities across cities are observed during the period. This research also seeks to explain the variation of wages between cities by factors such as agglomeration (density and city size), location advantages (distances from central cities and from the coastline), educational attainment, industrial structure and administrative hierarchy. Many of the factors are found to be important in explaining wage differences in Western countries but are yet to be tested in China. Some factors such as distance from the coast, industrial structure and administrative hierarchy are considered because of China’s unique social and economic systems.