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Relative Prices and Wages in China: Evidence from a Panel of Provincial Data

Author

Listed:
  • Nagayasu, Jun

    (University of Tsukuba)

  • Liu, Ying

    (ShanDong University)

Abstract

Using Chinese provincial data, we examine the relationship between relative prices and wages, which can be derived on the basis of the Balassa-Samuelson theorem. First, considering cross sectional dependency in our data, we implement recently developed panel unit root tests. We report strong evidence of non-divergence in the prices of provinces vis-a-vis those of the benchmark (Beijing) and weaker evidence in wages. In the latter case, the results seem sector-specific, suggesting that wages in some industries are not following the trend in Beijing. Secondly, using sectorlevel data, we find evidence that relative prices can be explained by relative wages.

Suggested Citation

  • Nagayasu, Jun & Liu, Ying, 2008. "Relative Prices and Wages in China: Evidence from a Panel of Provincial Data," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 183-203.
    • Handle: RePEc:ris:integr:0431
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    Citations

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    Cited by:

    1. Nagayasu, Jun, 2014. "Regional inflation, spatial location and the Balassa-Samuelson effect," MPRA Paper 59220, University Library of Munich, Germany.
    2. Nagayasu, Jun, 2009. "Regional Inflation in China," MPRA Paper 24722, University Library of Munich, Germany.
    3. Dia, Enzo & Jiang, Lunan & Menna, Lorenzo & Zhang, Lin, 2023. "Interest margins, lending rates and bank productivity among Chinese provinces," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 104-127.
    4. Takao Fujii & Yoichi Matsubayashi, 2016. "The Balassa-Samuelson Effect and the Labor Market in Japan F1977-2008," Discussion Papers 1626, Graduate School of Economics, Kobe University.
    5. Enzo Dia & Lunan Jiang & Lorenzo Menna & Lin Zhang, 2018. "Common Banking across Heterogenous Regions," CFDS Discussion Paper Series 2018/2, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    6. Jun Nagayasu, 2017. "Regional inflation, spatial locations and the Balassa-Samuelson effect: Evidence from Japan," Urban Studies, Urban Studies Journal Limited, vol. 54(6), pages 1482-1499, May.

    More about this item

    Keywords

    Purchasing power parity; the Balassa-Samuelson effect; panel unit root tests; convergence speed; Chinese provincial data; bootstrap methods;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F30 - International Economics - - International Finance - - - General

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