| This paper applies three branches of economics which are international economics, spatial economics and labor economics to analyze the chain relations of FDI heterogeneity, industrial agglomeration patterns and wage. This paper divides the theoretical mechanism into three important segments such as the relations between FDI heterogeneity and industrial agglomeration patterns, the effect of agglomeration patterns on labor productivity, the gap of labor productivity and wage caused by labor market characters. On this basis,7 proposals brought forward in theory are proved from evidence of China’s typical regions.At first, FDI decomposes into horizontal FDI, vertical or global export platform FDI. And industrial agglomeration patterns decomposes into specialization and diversification. As for the relations between FDI heterogeneity and industrial agglomeration patterns, this paper relies on the difference of heterogeneous FDI in interactions with their headquarters and in relations with industries. On these basis, this paper obtains that horizontal FDI can improve diversification of local region. However, vertical or global export platform FDI forms specialization in host region.To find the effect of agglomeration on labor productivity and wage, this paper brings in agglomeration patterns to research the endogenous relations of labor skill, labor productivity and wage under the imperfect competitive labor market. By analyzing, this paper concludes wage growth is resulted from existing knowledge transmission in the specialized region. But without new knowledge coming in, wage growth is influenced by marginal decrease of labor productivity in a long run. Otherwise, labor mobility across-industries may create new knowledge and drive firms to train their new staffs. Therefore, wage growth is sustainable.What is more, we use product substitution elasticity to character effect of FDI heterogeneity to establish the relation of FDI heterogeneity, industrial agglomeration patterns and wage. On the basis of monocentric spatial configuration model of Fujita et al. (1998), this paper concludes that the effect of horizontal FDI consist with diversification and is always to promote wage growth, but the effect of vertical FDI leads to specialization and has a positive influence on wage only if the region size keeps small.Before the empirical study, it is necessary to find a pair of typical samples. Though investigation, we select Guangdong and Zhejiang province. What is more, in order to test our proposals from theory, an important problem is to measure industrial agglomeration patterns. This paper takes an effort in three aspects:(l)Calculating the inverse HHI index to describe the industry variety of the region. (2)Estimation results by PCSE for panel data on the condition of heteroscedasticity between group, cross-sectional correlation and auto-correlation within group to catch unobserved information of agglomeration economies. (3)Using interaction terms of FDI heterogeneity, HHI and agglomeration size with labor productivity to reflect the effect agglomeration economies on wage.This paper uses the panel data in city level from 1998 to 2007 and in industry level from 2003 to 2010 to do empirical study. The results by PCSE indicate the following:(1)Horizontal FDI promotes significantly diversification of Zhejiang. Vertical or global export platform FDI promotes Guangdong to specialize significantly. (2) Wage growth is benefited from increasing agglomeration size in Zhejiang.There is a negative relation between agglomeration size and wage growth in Guangdong, although agglomeration size has a positive effect to transfer labor productivity to wage. (3) The interaction between industry varieties and labor productivity promotes wage growth in Zhejiang, but reduces wage growth in Guangdong. (4) Both Zhejiang and Guangdong’s estimation results support horizontal FDI benefit to wage growth and strength transformation of labor productivity to wage.Finally, this paper proposes suggestions and strategies in aspects of wage growth, government intervention on FDI and industry upgrading of China.
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