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Productivity As If Space Mattered: An Application to Factor Markets Across China

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  • Cheng, Wenya
  • Morrow, John
  • Tacharoen, Kitjawat

Abstract

Although firms are dispersed across space and may face radically different production conditions, this dimension of firm heterogeneity is often overlooked. Differences between factor markets, especially for labor, are stark. To pursue this line of inquiry, we model firm hiring across local labor markets. We then use the model to estimate and quantify the role of distinct regional labor markets in firm input use, productivity and location by combining firm and population census data. Considering modern China as a country with substantial regional variation, we find labor costs vary by 30-80%, leading to 3-17% differences in TFP once nonlabor inputs are considered. Favorably endowed regions attract more value added per capita, providing new insights into within-country comparative advantage and specialization.

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  • Cheng, Wenya & Morrow, John & Tacharoen, Kitjawat, 2013. "Productivity As If Space Mattered: An Application to Factor Markets Across China," MPRA Paper 45743, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:45743
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    Cited by:

    1. Timo Mitze & Teemu Makkonen, 2020. "When interaction matters: the contingent effects of spatial knowledge spillovers and internal R&I on firm productivity," The Journal of Technology Transfer, Springer, vol. 45(4), pages 1088-1120, August.
    2. repec:wsr:wpaper:y:2013:i:121 is not listed on IDEAS
    3. Defever, Fabrice & Riaño, Alejandro, 2012. "China's pure exporter subsidies," LSE Research Online Documents on Economics 48929, London School of Economics and Political Science, LSE Library.
    4. Fabrice Defever & Alejandro Riaño, 2017. "China’s Dual Export Sector," Discussion Papers 2017-01, University of Nottingham, GEP.

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    More about this item

    Keywords

    General Equilibrium; Factor Endowments; Structural Estimation; Productivity.;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • F1 - International Economics - - Trade
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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