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Federal Reserve Bank of San Francisco
Working Paper Series
Persistence of Regional Inequality in China
Christopher Candelaria
Mary C. Daly
Galina Hale

Regional inequality in China appears to be persistent and even growing in the last two decades. We study potential explanations for this phenomenon. After making adjustments for the difference in the cost of living across provinces, we find that some of the inequality in real wages could be attributed to differences in quality of labor, industry composition, labor supply elasticities, and geographical location of provinces. These factors, taken together, explain about half of the cross-province real wage difference. Interestingly, we find that inter-province redistribution did not help offset regional inequality during our sample period. We also demonstrate that inter-province migration, while driven in part by levels and changes in wage differences across provinces, does not offset these differences. These results imply that cross-province labor market mobility in China is still limited, which contributes to the persistence of cross-province wage differences.

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Christopher Candelaria & Mary C. Daly & Galina Hale, Persistence of Regional Inequality in China, Federal Reserve Bank of San Francisco, Working Paper Series 2013-06, 25 Mar 2013.
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Keywords: China; Wages; Labor market; Labor supply
DOI: 10.24148/wp2013-06
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