| Abstract | This paper explores the impact of specialization or diversity to the dynamic relation between wage and labor productivity under the angle of spatial economics. We build the theory model to characterize the difference and endogenous change of labor skills, labor productivity and wage in specialization and diversity. From the industry level, this paper innovates using cross-sectional correlation to measure agglomeration economies which are unobserved in specialization or diversity. As for samples in empirical study,we choose Zhejiang and Gangdong which are similar in economic development level, but different in diversity. Using those two region’s manufacture industries panel data from 2003 to 2010, the result indicates the more diversified of the region , the higher wage could be in the long run by PCSE. Meanwhile the specialized or less diversified region, wage growth may sacrifice labor productivity improvement. Additionally, the relation of labor shortage and wage is not significant when cross-sectional correlation. There is a negative relation between firm scale and wage in diversity, on the contrary, wage increase is beneficiary from large firm scale in specialization. |