Market Potential And Interregional Wage Inequality

Since reform and opening, China's economic development has made remarkable achievements in comprehensive national strength and people's living standards improved significantly. However, along with the rapid economic growth, the wage inequality between regions in China is growing gradually, wage inequality is become a important factor that influenced and restricted economic and social development. Currently there are many studies on wage inequality, but the study based on the spatial economy is rare.Firstly, this paper establish a spatial economic model of the wage inequality, then make the qualitative analysis of the status of market potential and the wage inequality in china. Then establish a econometric models, using the China Prefecture-level panel data from 1998-2007 to test the relation between market potential and wage. The empirical results show that market potential has significantly positive effect on wage. Other factors, such as foreign direct investment, employment density and human capital, also have effects on wage. Finally, It comes to a conclusion and gives some measurements and suggestions.