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Work 409

Work 409

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07/10/2013

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BIS Working Papers
No 409
Wage and price dynamicsin a large emergingeconomy: The case of China
by Carsten A Holz and Aaron Mehrotra
Monetary and Economic Department
April 2013JEL classification: E31; F42; J30Keywords: Labour costs, inflation, China, globaleconomic slack, globalisation
 
 BIS Working Papers are written by members of the Monetary and EconomicDepartment of the Bank for International Settlements, and from time to time byother economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them arethose of their authors and not necessarily the views of the BIS.This publication is available on the BIS website (www.bis.org).
© Bank for International Settlements 2013. All rights reserved. Brief excerpts may bereproduced or translated provided the source is stated.
ISSN 1020-0959 (print)ISBN 1682-7678 (online)
 
WP40
9
Wage and price dynamics in a large emerging economy: The case of China
iii
 
Wage and price dynamics in a large emergingeconomy: The case of China
1
 
Carsten A Holz
2
and Aaron Mehrotra
3
 
Abstract
This study finds that the growth in labour costs in China is not passed through fullyto final prices in China, neither in the tradable goods sector nor in the economy as awhole. This probably reflects the strong pressure on profit margins from a highlycompetitive environment, especially in manufactured goods. The potentialimplications of labour cost increases in China for global inflation pressures are alsodiscussed.Keywords: Labour costs, inflation, China, global economic slack, globalisationJEL Classification: E31; F42; J30
1
The views expressed in this paper are those of the authors and do not necessarily represent thoseof the Bank for International Settlements. Bilyana Bogdanova, Lillie Lam and Agne Subelyteprovided excellent research assistance. Corresponding author: Aaron Mehrotra, email:aaron.mehrotra@bis.org. We are grateful to Philip Turner, Frank Packer, Andrew Filardo, JamesYetman, Guonan Ma, Chang Shu, Marco Lombardi, Feng Zhu, Tomoyuki Fukumoto, Junhan Kim,Woon Gyu Choi, and seminar participants at the Bank for International Settlements, Bank of Japan,the Bank of Korea, the City University of Hong Kong and the Hong Kong Institute for MonetaryResearch for very helpful comments and discussions.
2
Stanford Center for International Development, Stanford University
3
Bank for International Settlements, Representative Office for Asia and the Pacific

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