Wage Agglomeration And Interaction In China's Industrial Sector: Observations And Explanations

It is no doubt that China's income distribution, especially the declining labor income share and increasing wage differentials between industries or regions, has become a very hot issue. This paper does not deny the fact of widening wage gap. However, different from previous studies, this paper focuses on the observed industry wage "club" phenomenon, attempts to discuss wage interdependence between industries, and provides a new perspective to understand the industrial wage differentials.Based on the reviews of relevant literatures, this paper puts much attention on a way of wage interaction-wage spillover and attempts to use it to explore the wage interaction between some industries. Combined with the featured fact at the background of China's economic reforms-the cultivation of labor market and the enhancement of labor mobility, this paper explores the mechanisms of wage interaction from two points of view:the wage interdependence between industrial sub-sectors and the wage interdependence of one industry between different cities. And the main contributions of this paper are as follows:First, this paper discusses the "old" issue-wage differentials in a new way. Base on the industrial wage "club" phenomenon, this paper attempts to explore the wage interaction mechanisms between different sectors of industries. With the clue that the increasing labor mobility leads to wage equalization, on the one hand, this paper subtly evaluates competition effect resulting from the state-owned enterprises reforms and labor market reforms on industrial wage interactions. On the other hand, this paper relates the geographical agglomeration characteristics of industries with the spatial distribution characteristics of wages to find out the channels of geographical wage interaction.Second, on research methodology, in order to measure wage spillover effect and explore wage interaction modes, this paper applies the models of spatial econometrics. In the related domestic researches, this is a new attempt. In the part of statistical description, this paper uses exploratory spatial data analysis method to visualize the characteristics of the wage distribution and examines the pattern of wage agglomeration among adjacent neighbors. In the empirical studies, the paper considers not only the common spatial weighting matrix based on geographic distance but also considers the economic distance weighting matrix to check the factors the affect wage interactions.Third, empirical studies on the industrial sub-sectors finds out that in every phase of state-owned enterprises reforms, wage "clusters" took place. But the mechanisms of wage interactions are different. In the 1980s and 1990s, "wage race" between state-owned enterprises still plays an important role, which leads to industrial wage interdependence directly. However, in the twentieth century, the state-owned enterprises'role in direct wage interaction is replaced by market competition, which means the wages of different industries interrelates with each other through product and factor markets competition. In the further analysis, this paper finds that in the industries monopolized by state-owned enterprises, where the labor mobility is small, still exists institutional wage comparisons. Meanwhile, discussion about state-owned sectors shows that the higher the share of state-owned enterprises, the more likely "wage race" happens, combined with the wage premium in these enterprises, which leads to unreasonably high average wage and obvious industrial wage differentials. On the contrary, in the industries which are usually faced with fierce competition, wages are often linked together through spillover effect of some economic variables.Finally, empirical studies on geographic wage interaction of one industry shows that while manufacturing industries obviously trend to concentrate in the eastern and coastal areas, and the wage distribution also displays some kind of spatial agglomeration trend. The more similar is the adjacent two areas'industrial structure, the more obvious is the wage interaction. Meanwhile, the industrial agglomeration imbalance has effect on the inter-regional wage determination and wage interaction mechanism. And the agglomeration benefits to the workers (i.e. wage increases) are localized, and have no obvious spillover effect to workers of neighboring regions. However, when taking into account the spatial clustering differentials, this paper finds that only in manufacturing industries with more even geographical distribution, the benefits of agglomeration spillovers to neighbors and wages are interacted directly through "wage race". Meanwhile, there is no geographical wage interaction in the manufacturing industry with most uneven distribution.The paper is organized as follows. Chapter 1 is an introduction. Chapter 2 surveys the literatures concerning the theme, provides comments to them and points out the possible directions in the domestic studies of this field. Chapter 3 reviews the stylized facts and institutional backgrounds about industrial wage interaction. Chapter 4 gives a theoretical framework to study the relationship between labor turnover cost and wage determination. Chapter 5 discusses the mechanisms of industrial sub-sectors empirically. Chapter 6 examines how industry agglomeration affects the inter-regional wage interaction channels.