Urban scale and wage premium: evidence from China

Using the data of the China General Social Survey (CGSS) in 2010, the sixth national census in 2010 and the fifth national census in 2000, this paper examines the urban scale's impact on workers' wages by employing instrumental variables method. The study shows that China's large cities with 1-5 million population and megalopolis over 5 million population have significant urban scale wage premium. The living cost difference and agglomeration economy are the main causes of the megalopolis and large cities' wage premium respectively. The high and low skilled workers both benefit from the expansion of urban scale. Policy implications of research findings are that moderate scale cities should be the main direction of Chinese urbanization; big cities should not only absorb high skilled labor, but also be inclusive for low skilled labor; migrant workers' urbanization is conducive to the prosperity of the city.