Research On The Effects Of City Size On Wage Premium

Wages are not only the main source of people’s livelihood,but also the key factor in people’s living standards.People expect high wages in return,so that they can get basic needs of life and entertainment.In fact,the level of salary is affected by many factors.Wages are related to labor productivity,per capita capital,human capital,etc.In addition,city size is also the important factor influencing income.With the deepening of reform and opening-up,the urbanization process of China has accelerated.More and more people are flocking to cities,which has led to the continuous expansion of urban scale.The issue of urban scale and wage premium has received widespread attention.This article studies the impact and mechanism of city size on wage premium.First,by sorting out wage determination theory and related research literature,it is found that two indicators of population and capital can be used to measure the size of the city.And the agglomeration economic effect and human capital effect are the mechanisms of city size on wage premium.Then,using data from the 2014,2016 and2018 China Family Panel Studies(CFPS)and the China City Statistical Yearbook,this article selects the population of urban municipal districts and urban capital stock as proxy variables for city size for empirical analysis.Empirical results show that the larger the city size,the higher the wage premium for workers.Moreover,when the city capital stock is used as the proxy variable of city size,for every 1% increase in the city size,the actual wage income of laborers increases by 0.0449%;when the population of the city’s municipal districts is used as the proxy variable for the city size,for every 1% increase in the city size,the labor force increases by 0.0196%.The influence coefficient of the former is significantly higher than that of the latter.For the test of the agglomeration economy effect,starting from the micro-action mechanism of the agglomeration economy,the matching effect and the learning effect in the agglomeration economy are respectively tested.The test results of the agglomeration economy effect and human capital effect show that the expansion of the city scale can promote the increase of labor productivity of enterprises through the scale effect of the agglomeration economy or the improvement of human capital,thereby driving the increase of wage premium.Next,this article divides the sample according to the skill and household registration of workers,and conducts heterogeneity test.The results show that high-skilled and local household registration workers are more likely to obtain high wage premiums.Finally,this article draws conclusions based on the theoretical basis and empirical test results,and puts forward suggestions from the perspective of urban agglomeration construction and new urbanization: cities should carry out construction according to local conditions,especially small and medium-sized cities should pay attention to the introduction and cultivation of talents.The local government needs to actively guide laborers to participate in employment training and improve the quality of laborers.