A Study Of Disparity Of China’s Regional Wages Viewed From The Perspective Of New Economic Geography

Since reform and opening, China’s economy has entered a rapid track of development, andits economic strength has been improved significantly. Along with this process, the wageinequality between the Chinese regions showed a trend of expansion. Wage inequality is becomea important factor that influenced and restricted economic and social development. This articlebased on the New Economic Geography to explain the Phenomenon that the trend of wageinequality between China’s regions continues to expand.According to the analysis the New Economic Geography of the wage equation shows that:Market Potential triggers an economy aggregation which aggravated the wage inequalitybetween regions. This paper attempts to put the Monetary externalities of market correlationeffects (market potential) and the technology externalities of not rely on the market correlation(employment density) into the general analytical framework, for which build a new wageequation to establish a econometric model. Using the China prefecture-level city panel datafrom2000-2010to analyze the degree of influence of the wage inequality between regions underMarket Potential and employment density after eliminate the endogenous problems throughinstrumental variables. The test results show that: based on national data, the elasticitycoefficient of wages with respect to market potential is about0.763-0.786and to employmentdensity is0.212-0.246, and to control variables such as human capital, foreign direct investmentless than0.05; For the three major regions, wages are positively correlated with Market Potential,but are not obviously with employment in the Central and western. Conclusion shows: areas withhigh market potential has high wage levels, triggers an economy aggregation easily.