Document Type
Article
Publication Date
2-2010
Abstract
There is almost no support for the proposition that capital is attracted to low wages from firm-level studies. We examine the location choices of 2,884 firms investing in China between 1993 and 1996 to offer two main contributions. First, we find that the location of labor-intensive activities is highly elastic to provincial wage differences. Generally, investors' wage sensitivity declines as the skill intensity of the industry increases. Second, we find that unobserved location-specific attributes exert a downward bias on estimated wage sensitivity. Using a control function approach, we estimate a downward bias of 50% to 90% in wage coefficients estimated with standard techniques.
Journal Title
Review of Economics and Statistics
Journal ISSN
346535
Volume
92
Issue
1
First Page
160
Last Page
166
Digital Object Identifier (DOI)
10.1162/rest.2009.11350
- Citations
- Citation Indexes: 38
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- Downloads: 400
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