Spatial Disparity of Skill Premium in China: The Role of Financial Intermediation Development

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Title: Spatial Disparity of Skill Premium in China: The Role of Financial Intermediation Development
Author: Lai, Tat-kei ; Wang, Luhang
Organization: Bank of Finland
Department / Unit: Bank of Finland Institute for Emerging Economies (BOFIT)
Series: BOFIT Discussion Papers
Series number: 6/2022
Year of publication: 2022
Publication date: 13.7.2022
Pages: 25
Subject (yso): rahoitus; koulutustaso; työvoima; rahoitusmarkkinat
Keywords: Bofit-kokoelma; Kiina
JEL: J24; J31; O11
Other keywords: Financial intermediation; Misallocation; Skill premium; China
Abstract: In China, the relative wages of high-skilled and low-skilled workers display huge variation across different regions. We examine whether financial intermediation development can explain such variation. Conceptually, better-developed financial intermediation helps financially-constrained firms raise new capital, which is usually skilled-biased, resulting in an increased demand for skilled labor and skill premium. Using a cross-section of workers from the 1% Population Survey of 2005, we find consistent evidence; besides, the relationship is stronger among workers in industries with higher capital-skill complementarity and in non-state-owned enterprises. Overall, our results suggest that the financial market plays a role in explaining skill premium in China.
Rights: https://helda.helsinki.fi/bof/copyright


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