University of Nottingham Ningbo China
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Market size, industrial structure and income distribution

25 April 2014 (14:30-16:00)

The School of Economics and The Nottingham Centre for Research on Globalisation and Economic Policy (GEP) China are pleased to invite you to the following research seminar given by Dr Liqiu Zhao from Renmin University of China.

About the seminar

The GDP share of service sector has been relatively low in China compared with other countries with similar income level. Meanwhile, the labour income share has also been low in China which could be a result of the low service share since service sector is relatively labour intensive. The depressed urbanisation rate - as a result of policies like the "Hukou" system -- is one of the possible reasons behind these phenomena. Motivated by this observation, this paper aims to investigate the relationship among market size (urbanisation), industrial structure and factor income distribution.

In this paper, we first develop a model with a two-tier CES utility function and two differentiated goods sectors characterised by increasing return to scale and monopolistic competition. We assume that one of the sectors is non-tradable. Two factors - labour and capital - are used in production. We show that if the elasticity of substitution between the tradable and non-tradable sectors is larger than one, then the larger market will have larger share of the non-tradable sector. Labour income share is also larger in the larger market, if we assume that the non-tradable sector is more labour intensive, which seems plausible in reality. The contribution of this research is two-folded. First, it provides a theoretical model that sheds new light on the mechanism through which market size may affect industrial structure and income distribution. Second, we provide a comprehensive empirical study on market size, industrial structure and income distribution using both cross-country data and cross-city data from China.

Speaker biography

Dr Liqiu Zhao is currently an Assistant Professor in the Department of Labor Economics, School of Labor and Human Resources at Renmin University of China. She earned her PhD at Katholieke Universiteit Leuven, Belgium and Master and Bachelor at Zhejiang University, all in economics. Her current research interests include Regional Economics, Labour Economics, and Empirical Industrial Organization.