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Economic reform, education expansion, and earnings inequality for urban males in China, 1988–2009

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  • Meng, Xin
  • Shen, Kailing
  • Xue, Sen

Abstract

In the past 20 or so years the average real earnings of Chinese urban male workers have increased by 350%. Accompanying this unprecedented growth is a considerable increase in earnings inequality. Between 1988 and 2009 the variance of log earnings increased from 0.28 to 0.54, a 94% increase. Using a unique set of repeated cross-sectional data this paper examines the causes of this increase in earnings inequality. We find that the major changes occurred in the 1990s when the labor market moved from a centrally-planned system to a market-oriented system. The decomposition exercise conducted in the paper identifies the factor that drives the significant increase in the earnings variance in the 1990s to be an increase in the within-education–experience cell residual variances. Such an increase may be explained mainly by the increase in the price of unobserved skills. When an economy shifts from an administratively determined wage system to a market-oriented one, rewards to both observed and unobserved skills increase. The turn of the century saw a slowing down of the reward to both the observed and unobserved skills, due, to some extent, to the college expansion program that occurred at the end of the 1990s.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 41 (2013)
Issue (Month): 1 ()
Pages: 227-244

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Handle: RePEc:eee:jcecon:v:41:y:2013:i:1:p:227-244

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: Earnings inequality; China;

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References

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Cited by:
  1. Gustafsson, Björn Anders & Li, Shi & Nivorozhkina, Ludmila & Wan, Haiyuan, 2014. "Yuan and Roubles: Comparing Wage Determination in Urban China and Russia at the Beginning of the New Millennium," IZA Discussion Papers 8241, Institute for the Study of Labor (IZA).
  2. Zhong Zhao & Zhaopeng Qu, 2013. "Wage Inequality of Chinese Rural-Urban Migrants Between 2002 and 2007," Working Papers PMMA 2013-04, PEP-PMMA.
  3. Peng, Fei & Kang, Lili, 2013. "Wage Flexibility in Chinese Labor Market 1989-2009," MPRA Paper 46651, University Library of Munich, Germany.

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