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The Park Place Economist

Abstract

This paper explores the linkages between the population, investment, and wages in both China nationally and in each of China’s provinces. The expected result of these linkages is twofold. First, provinces with the greatest per capita investment, whether state-sponsored or private, should in theory experience the greatest change in per capita wage. This is due to the increased marginal product of labor resulting from capital investment, which ultimately will be reflected in per capita wages in a perfectly competitive market. From this hypothesis, it follows that the provinces experiencing the greatest change in wage per capita will experience the greatest change in population. It is logical to assume that rural workers will move to urban areas if the wage incentive is great enough. Though the population increase will, in theory, push urban wages down, this effect is secondary and should take a longer period of time.

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