Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92691
Authors: 
Li, Muqun
Coxhead, Ian
Year of Publication: 
2010
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 780
Abstract: 
Does globalization increase inequality in developing countries, and if so, how? In a theoretical model of a regionally heterogeneous economy, we show how different regional rates of technical progress due to trade and FDI interact with constraints to unskilled labor mobility. As favored regions benefit more from trade, their growing demand for skills drains skilled workers from disadvantaged areas, and average incomes in the former grow faster than in the latter. Moreover, this unbalanced regional growth may also raise inequality within each region. It could even reduce absolute income per capita in the less favored region. We test these predictions with Chinese data from the Open Door era. Results confirm that different regional growth rates ave increased both interregional and intraregional inequality. Moreover, growth of skills-based export industries in coastal regions is associated, other things equal, with lower incomes for the poor in inland provinces.
Subjects: 
trade
investment
wage premium
migration
inequality
China
JEL: 
F16
O15
R1
Document Type: 
Working Paper

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