Real estate expansion and manufacturing wage increase in China: From the perspective of labor reallocation

Abstract

The massive expansion of China's real estate sector has raised manufacturing wage through the channel of reallocating low-skilled labor from manufacturing sectors to the real estate sector. Using data of manufacturing firms in 35 major cities from 2000–2007, we find that the expansion of the real estate sector resulted in higher manufacturing wage. Additionally, we find that this positive effect was more pronounced among labor-intensive firms, among non-SOEs, and among firms in cities with a low development level of the labor market. By investigating the occupation choice of rural-to-urban migrant workers, we find that real estate expansion made migrant workers less likely to choose manufacturing jobs while more likely to choose construction jobs, which further confirms the labor reallocation story.

Keywords

• Real estate
• Wage cost
• Labor market
• Manufacturing