East Asia Workshop: Politics, Economy and Society presents

 

“Wages versus Amenities in the Growth of Secondary Industry Employment”

(with William H. McGuire and Nicholas C. Holtkamp)

Belton Fleisher

Professor Emeritus, Department of Economics

Ohio State University

4:30-6:00 p.m., Tuesday, December 1, 2015

Pick Lounge, 5828 South University Ave.

Abstract

We examine the expansion of manufacturing industry in China from the provinces that were the manufacturing powerhouses of the 1990s to adjacent provinces in the Coastal and Inland regions. We concentrate on industry in provinces outside of the Northeast, where the concentration of SOE heavy manufacturing declined sharply as the result of reforms in the 1990s and focus on the questions: a) Do rising wages in manufacturing stimulate relocation of employment to lower-wage regions? b) Is location of employment more sensitive to wages, to worker human capital, or amenities such as infrastructure and Special Economic Zones? c) Identification of the causal roles of wages, human capital, and infrastructure amenities is complicated by endogeneity of human capital through return migration of skilled workers, location of SEZs to areas with better-educated workforce and access to transportation infrastructure, and the impact of rising labor demand on wage rates in expansion areas. We use several alternative estimation strategies and despite endogeneity issues. We find a fairly robust evidence of an elasticity of demand for employment with respect to real wage of approximately -0.2. The estimated impact of education as measured by proportion of workforce with schooling at least junior high school is large and robust, although smaller and less precisely estimated in the presence of the SEZ variables. The presence of Special Economic Zones organized at the national level has a significant, positive impact on secondary industry employment, and there is no evidence of cross-provincial crowing out of industry expansion.

 

Workshop website: http://cas.uchicago.edu/workshops/eastasia/

Student coordinator: Yan Xu (xuyan@uchicago.edu)

Faculty sponsors: Xi Song, Dali Yang and Dingxin Zhao

 

This presentation is sponsored by the Council on Advanced Studies in Humanities and Social Sciences and Center for East Asian Studies. Persons with disabilities who believe they may need assistance please contact the student coordinator in advance.