Skills and the City in China

Abstract

This paper examines spatial allocation and urban wage premiums of skills in China by leveraging a comprehensive dataset that includes several waves of population censuses and nationally representative surveys. We document an increasing concentration of occupations requiring high levels of cognitive tasks in large cities, and individuals with higher cognitive skills receive larger urban wage premiums. To explore the mechanisms, we find a notable increase in the quality of matching between jobs and skills as well as enhanced learning effects in large cities. However, we do not observe urban wage premium for workers with higher levels of individual social skills, which differs from patterns observed in developed countries. We examine this discrepancy in light of market imperfections and provide suggestive evidence that social skills may help promote opportunistic behaviors within weak institutional environments.

Keywords: cognitive skills, social skills, agglomeration economies, urban wage premium, china