Working Paper: CEPR ID: DP9352
Authors: Pierre-Philippe Combes; Sylvie Dumurger; Shi Li
Abstract: We evaluate the role that cities play on individual productivity in China. First, we show that location explains a large share of nominal wage disparities. Second, even after controlling for individual and firms characteristics and instrumenting city characteristics, the estimated elasticity of wage with respect to employment density is about three times larger than in Western countries. Land area and industrial specialisation also play a significant role whereas the access to external markets does not. Therefore, large agglomeration economies prevail in China and they are more localised than in Western countries. Third, we find evidence of a large positive impact of the local share of migrants on local workers' wages. Overall, these results strongly support the productivity gains that can be expected from further migration and urbanisation in China.
Keywords: Agglomeration economies; China; Migration; Urban development; Wage disparities
JEL Codes: J31; O18; O53; R12; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| being located in a denser city (R23) | wages (J31) |
| local share of migrants (F22) | local workers' wages (J39) |
| land area (Q24) | wage differentials (J31) |
| industrial specialization (L69) | wage differentials (J31) |
| access to external markets (F10) | wage differentials (J31) |