Abstract
We analyze how rising labor costs contribute to economic restructuring in China. In a panel of prefectural cities and industries, spanning the years 1999-2007, we employ instrumental variables to identify the effect of increasing local wage levels. We find adverse effects on performance of (low-skilled) labor intensive industries in China’s advanced regions. Consistent with cost-saving industry relocation, such industries expand in other locations, where wages are comparatively low. Comparing locations where such industries expand to those where they do not, we find that both economic complexity and subsequent per capita income increased faster in the former group.
| Original language | English |
|---|---|
| Pages (from-to) | 579-615 |
| Number of pages | 37 |
| Journal | Open Economies Review |
| Volume | 34 |
| Issue number | 3 |
| Early online date | 3 Nov 2022 |
| DOIs | |
| Publication status | Published - Jul 2023 |
JEL classifications
- d24 - "Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity"
- o11 - Macroeconomic Analyses of Economic Development
- o14 - "Industrialization; Manufacturing and Service Industries; Choice of Technology"
- o53 - Economywide Country Studies: Asia including Middle East
- r11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
Keywords
- China
- Regional Development
- Labor Costs
- Industry Relocation
- Economic Complexity