Analysis Of The Wage Gap Based On The New Economic Geography Perspective

Decades of growing openness and reform, China's economy has developed rapidly, and the living standard has improved remarkably. With the high-speed growth of economy, the growing interregional wage inequality has gradually became the main problem in China. According to a survey released by recent research, the economic growth rate and industrial concentration index in eastern coastal provinces are obviously larger than those in interior provinces, which directly contributes to the rising of wage disparity in China. If the gap continues to increase, It will consequentially affect economic development, and even can cause social tension. Therefore, With building a well-off society in an all-round way and constructing a harmonious society was put forward, It is necessary for us to fully understand the importance of regional wage inequality. Recently, most domestic scholar has focused on it, some beneficial exploration and research are presented. However, A study seldom investigates wage disparity issue at the regional level on the basis of new economic geography approach and traditional labor economic theory. Thus, This paper will contribute to the study on improving the spatial distribution of wage and alleviating the clash between efficiency and equality. In this paper, we examine the currently transformation trend of wage inequality and study the link between wage disparity and some independent variables, which include market potential, localization externalities, urbanization externalities, human capital and foreign direct investment, etc. Finally, we not only find new empirical evidences for explaining the wage inequality in China, but also show proof for supporting New economic geography theory.This paper consists of six parts, firstly, It states the research intention and practical meaning and also defines some key concepts, and shows the structure and innovation. Secondly, It review recent literature on wage inequality. This chapter includes four aspects, namely, Labor Economy, New Institutional Economy, New Classic Economy and New Geography Economy, respectively. And It draw a conclusion and criticism. Thirdly, we, using coefficient variance, Gini coefficient and Theil index, analyze the wage disparity in China at present. Section 1 defines three indexs, Section 2&3 analyze the inter-regional and inter-industrial wage equality in China. Furthermore, we construct the wage system circular graph at macro level in Chapter 4, then we examine the influence of main five factors on wage equality. Based on the above chapter, using spatial wage inequality theory, we use the provincial panel data during 1997-2004 to mainly estimate effects of market potential, localization externalities and urbanization externalities on wage inequality and investigate currently change trend of wage inequality. Finally, It comes to a conclusion and gives some measurements and suggestions.