Minimum Standards of Living, Income, and Positional Concerns in Mid-Reform Urban China

This paper investigates whether Chinese factor markets became more integrated in the period around WTO accession. This would have required reductions in factor price dispersion. However, prices for 18 agricultural factors between 1998 and 2001 and for 118 industrial factors between 1999 and 2002 varied significantly across 36 cities. Variation declined temporarily for industrial factors, perhaps to facilitate WTO accession, but not for agricultural factors. Sixteen factors had especially high frequencies of city-specific price components, suggesting that they may have been subject to domestic trade restrictions. Idiosyncratic prices for agricultural factors were concentrated in two cities. However, most cities had idiosyncratic prices for at least some industrial factors.