This research theoretically and empirically studies China’s labor market integration and the effect of economic openness. We introduce two open parameters to the theoretical framework of Robertson (2000) to analyze the impact of economic openness on China’s labor market integration. Based on theoretical analysis, we use data from 1987 to 2006 to carry out an empirical study on China’s labor market integration measurement and the impact of economic openness on China’s labor market integration. The research indicates that the ability to return to the equilibrium wage difference between two labor markets after shock reflects a good index for measuring labor market integration. Economic openness has an obvious effect in terms of promoting China’s labor market integration by removing the obstruction of labor movement and increasing regional labor market integration. The labor market integration progress differs between regions, with the labor markets of coast areas such as NorthChina area, EastChina area and SouthChina area, which have one or two provinces as regional labor market centers, being better integrated than those of other interior areas.

Maio Yi, Shen Zhou

Published in Berlin Working Papers on Money, Finance, Trade and Development, May 2014