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Regional Differences and Threshold Effects of Capital-Skill Complementarity in China

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  • Ren Wang
  • Hongqi Ma

Abstract

On the framework of Chris and Viera (2005), this article studies the capital-skill complementarity and its regional differences of China, firstly. It is shown that there exists evidence in favor of capital-skill complementarity on the full sample of China. When we test its regional differences, we find no evidence in favor of capital-skill complementarity in the central and western regions, but strong evidence in the eastern region. Further study finds that, the “capital-skill complementarity” exists in the threshold effect. Thus, we argue that the original differences of capital-skill complementarity are relative to the economic development. These results reveal that the low-income region (such as the central and western regions) tends to allocate their capital to complement their abundance of unskilled labor but not skilled labor, but the middle-income region (such as the eastern region) shows just the opposite trend. In short, this article provides some new evidences for the nonlinearity of capital-skill complementarity and supports the viewpoint on “transitory phenomenon” of capital-skill complementarity.

Suggested Citation

  • Ren Wang & Hongqi Ma, 2017. "Regional Differences and Threshold Effects of Capital-Skill Complementarity in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(6), pages 1425-1441, June.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:6:p:1425-1441
    DOI: 10.1080/1540496X.2016.1244511
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