The Study On The Effects Of The Wage Level On The Pattern Of Economic Development In China

The rapid expansion of total economic outputs have been achieved since the reform and opening up, production factors which support economic growth have changed, the increasing labor cost leads to decrease of comparative advantage. With the impact of the financial tsunami in 2008, China used fiscal and monetary policies to stimulate the economy, which avoided economic decline sharply, but the mode of economic development and economic structure’s problems are still the bottleneck that restricts China’s sustainable development. Especially, emergence of labor shortage reflects the urgency of transformation of economic development mode. At the present stage, research on the effects of wage level on the transformation of economic development mode becomes great practical significance.This paper analyses the impact of wage level on the transformation of economic development mode. Firstly this article not only defines the transformation of economic development mode and establishes the index system, but also makes a comprehensive measurement of it. Mechanisms of wage level on the transformation of economic development mode are as followed:optimization effect of wage income distribution, effect of industrial structure’s upgrading, promotion effect of effective demand. Afterwards, this paper analyzes the evolution stages of wage level on transformation of economic development mode and reveals the relationship between them in fuzzy analysis method.Finally, this article empirically tests the impact of wage level on China’s economic development mode by using SYS-GMM during 1996-2010. The estimation results show the wage level has significant positive effect on the transformation of economic development mode. By adding the urban rate, consumption rate and other variables, the results remain robust. This effect is causal, it means that wage level promotes China’s economic development mode. Generally speaking, wage level and the transformation of economic development mode may have a reverse causality. In order to overcome the endogeneity of the wage level, this paper chooses the proportion of flowing population as its instrumental variable. Results of endogenous test show that wage level still has a significant role in promoting China’s economic development. In addition, innovation, supporting infrastructure and the integration of urban and rural development accelerate the transformation of economic development mode.