Abstract Based on a new economic geography (NEG) framework， the paper examines the link between wages and market potential using panel data on 176 prefectural level cities in China. The estimation results confirm that wages are positively correlated with market potential. Elasticity coefficient of wages with respect to market potential is about 75-77%. Human capital, FDI and natural conditions are also correlation with regional wages. Importance of proximity to markets for wages has also increased over time, but the effect of such shock is geographically limited.
2012, Vol. 1 
