A theoretical framework for the impact of urbanization on labor cost in China

Abstract

The emergence of China as a global economic power has attracted increasing attention on its relatively low labor cost. However, in recent years, labor cost in China continues to rise. And there are many factors could have impacted the change of labor cost, but limited study has attempted to discuss the relationship between urbanization and labor cost in China. This paper attempts to develop a theoretical framework to explain the rising labor cost from the perspective of urbanization process in China, and discuss how urbanization impacts the rising of labor cost based on relevant theories and literature. And the theoretical framework developed in this paper shows that urbanization could have influence on the change of labor cost through the increasing living cost, economic growth and population quality improvement.