Market potential, effective border and labor efficiency in China

May. 12,2020
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Based on D-S theoretical framework in new economic geography and spatial econometrics, the paper defines the spatial boundary of market potential of China’s labor market on the dual perspectives of wage and employment by constructing a multi-level regression model and using the provincial panel data and China Labor-Force Dynamics Survey (CLDS) micro-samples from 2012 to 2014. The study shows that, in the overall space, the market potential significantly raises the wage and employment, which brings double benefits to the labor market. In the local space, as the distance between provinces increases, it is difficult for the market potential to continuously exert its spatial effect on the labor market, and the boundary effect appears in a certain radius. In terms of grouping, from the perspective of geographical location, the market potential has the largest effect to raise wage in coastal areas, then the border and inland areas, and the improvement of employment in inland areas is the most remarkable. From the perspective of human capital , expanding market potential will narrow the wage gap between high and low human capital concentration and improve the employment of regions and groups with low human capital. However, the market potential has a classification effect on wage between high and low human capital groups. From the perspective of the mode of transportation,the geographical shrinkage effect generated by the development of high-speed rail further improves the marginal growth effect of market potential on employment. The marginal growth effect on wage of high-speed rail is relatively weaker than that of ordinary railways, but the gross effect is still positive. According to the above statement, reshaping the space by breaking through the effective boundary of market potential and spatial fix within the effective boundary can effectively adjust the gap of wage and employment caused by market potential differences between regions, and it will finally improve the efficiency of labor market.

Corresponding Author: TANG Daisheng
CNKI Press Officer: ZHONG Ming

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