The Rise of External Economies in Beijing: Evidence from Intra-Urban Wage Variation

Posted: 11 Nov 2019

See all articles by Siqi Zheng

Siqi Zheng

Massachusetts Institute of Technology (MIT) - Center for Real Estate; Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning; Hang Lung Center for Real Estate, Tsinghua University

Richard Peiser

Harvard University

Wenzhong Zhang

Chinese Academy of Sciences (CAS) - Institute of Geographic Sciences and Natural Resources Research (IGSNRR)

Date Written: October 30, 2019

Abstract

Over the past thirty years, labor market and land market liberalization in China has transformed the spatial structure of Chinese cities. This study represents the first attempt to empirically investigate the extent to which firms' location choices in a large Chinese city are influenced by the tradeoff between greater external economies from adjacent employment density, on the one hand, and the higher wage cost due to longer commuting, on the other hand, as predicted by the endogenous urban structure model of Lucas and Rossi-Hansberg [Lucas, R.E. Jr. and Rossi-Hansberg, E., 2002. On the internal structure of cities. Econometrica 70, 1445–1476.]. Employing a large-scale worker survey and job density data from Beijing, we find that locations with higher adjacent job density tend to require longer commuting, and private-sector firms pay a wage premium in these locations. We also find such wage premium to be more significant for skill-intensive firms. These findings reveal the rise of agglomeration economies in Beijing that shapes its urban form evolution.

Suggested Citation

Zheng, Siqi and Peiser, Richard and Zhang, Wenzhong, The Rise of External Economies in Beijing: Evidence from Intra-Urban Wage Variation (October 30, 2019). Available at SSRN: https://ssrn.com/abstract=3478286

Siqi Zheng (Contact Author)

Massachusetts Institute of Technology (MIT) - Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

Hang Lung Center for Real Estate, Tsinghua University ( email )

HeShanHeng Building
Beijing, 100084
China

HOME PAGE: http://https://siqizheng.mit.edu/

Richard Peiser

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Wenzhong Zhang

Chinese Academy of Sciences (CAS) - Institute of Geographic Sciences and Natural Resources Research (IGSNRR) ( email )

Beijing
China

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