How New Economic Geography Explains Provincial Wage Disparities: Generalised Methods of Moments Approach
In recent years, new and promising developments have made new economic geography (NEG) a popular framework for examining the spatial distribution of economic activity around the world. A major NEG prediction is that wages are higher in regions with a large market and easy access to suppliers of inte...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Russian Academy of Sciences, Institute of Economics of the Ural Branch
2019-03-01
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| Series: | Экономика региона |
| Subjects: | |
| Online Access: | http://economyofregion.com/current/2019/72/3149/pdf/ |
| _version_ | 1827886200306794496 |
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| author | Hien Th anh Hoang Linh T. D. Huynh George S. Chen |
| author_facet | Hien Th anh Hoang Linh T. D. Huynh George S. Chen |
| author_sort | Hien Th anh Hoang |
| collection | DOAJ |
| description | In recent years, new and promising developments have made new economic geography (NEG) a popular framework for examining the spatial distribution of economic activity around the world. A major NEG prediction is that wages are higher in regions with a large market and easy access to suppliers of intermediate inputs. Based on this principle, we examine this hypothesis by using provincial data in Vietnam. Since the Doi Moi reform in 1986, the Vietnamese economy has successfully transformed from a centrally planned to a market-based economy. The Vietnamese experience has been seen as a valuable case study for other economies in transition. This paper estimates a structural model of NEG using Vietnamese provinces data for the period 2000 — 2012. Using instrumental variables based on the principle of generalised method of moments (GMM), we take account of potential endogeneity problem between regressors. We provide evidence that the industrial linkages and trade costs are statistically significant and quantitatively important in explaining variation in provincial wages. This finding is robust to controlling for a wide range of considerations. Moreover, local governments need to strengthen human capital as the first step towards improving average wages. Indeed, a better education system is not only instrumental to raising average earnings per worker, but also crucial for minimizing income inequality in the long run. |
| first_indexed | 2024-03-12T19:59:09Z |
| format | Article |
| id | doaj.art-bef7d052e37641ab8a9047c024f1c8b2 |
| institution | Directory Open Access Journal |
| issn | 2072-6414 2411-1406 |
| language | English |
| last_indexed | 2024-03-12T19:59:09Z |
| publishDate | 2019-03-01 |
| publisher | Russian Academy of Sciences, Institute of Economics of the Ural Branch |
| record_format | Article |
| series | Экономика региона |
| spelling | doaj.art-bef7d052e37641ab8a9047c024f1c8b22023-08-02T02:37:13ZengRussian Academy of Sciences, Institute of Economics of the Ural BranchЭкономика региона2072-64142411-14062019-03-0115120521510.17059/2019-1-16How New Economic Geography Explains Provincial Wage Disparities: Generalised Methods of Moments ApproachHien Th anh Hoang0Linh T. D. Huynh1George S. Chen2Duy Tan UniversityTh e University of Da NangUniversity of New EnglandIn recent years, new and promising developments have made new economic geography (NEG) a popular framework for examining the spatial distribution of economic activity around the world. A major NEG prediction is that wages are higher in regions with a large market and easy access to suppliers of intermediate inputs. Based on this principle, we examine this hypothesis by using provincial data in Vietnam. Since the Doi Moi reform in 1986, the Vietnamese economy has successfully transformed from a centrally planned to a market-based economy. The Vietnamese experience has been seen as a valuable case study for other economies in transition. This paper estimates a structural model of NEG using Vietnamese provinces data for the period 2000 — 2012. Using instrumental variables based on the principle of generalised method of moments (GMM), we take account of potential endogeneity problem between regressors. We provide evidence that the industrial linkages and trade costs are statistically significant and quantitatively important in explaining variation in provincial wages. This finding is robust to controlling for a wide range of considerations. Moreover, local governments need to strengthen human capital as the first step towards improving average wages. Indeed, a better education system is not only instrumental to raising average earnings per worker, but also crucial for minimizing income inequality in the long run.http://economyofregion.com/current/2019/72/3149/pdf/New economic geographyagglomeration economiesindustrial linkagesmarket accesstrade costswage equationliving costshuman capitalprovincial panel datageneralised method of momentsVietnam |
| spellingShingle | Hien Th anh Hoang Linh T. D. Huynh George S. Chen How New Economic Geography Explains Provincial Wage Disparities: Generalised Methods of Moments Approach Экономика региона New economic geography agglomeration economies industrial linkages market access trade costs wage equation living costs human capital provincial panel data generalised method of moments Vietnam |
| title | How New Economic Geography Explains Provincial Wage Disparities: Generalised Methods of Moments Approach |
| title_full | How New Economic Geography Explains Provincial Wage Disparities: Generalised Methods of Moments Approach |
| title_fullStr | How New Economic Geography Explains Provincial Wage Disparities: Generalised Methods of Moments Approach |
| title_full_unstemmed | How New Economic Geography Explains Provincial Wage Disparities: Generalised Methods of Moments Approach |
| title_short | How New Economic Geography Explains Provincial Wage Disparities: Generalised Methods of Moments Approach |
| title_sort | how new economic geography explains provincial wage disparities generalised methods of moments approach |
| topic | New economic geography agglomeration economies industrial linkages market access trade costs wage equation living costs human capital provincial panel data generalised method of moments Vietnam |
| url | http://economyofregion.com/current/2019/72/3149/pdf/ |
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