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What Lies behind Rising Earnings Inequality in Urban China? Regression-based Decompositions

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Author Info
Deng Quheng
Li Shi
Abstract

Coupled with advances in enterprise reform and changes in the wage structure, earnings inequality in urban China has been increasing, and this has contributed significantly to rising income inequality. Using urban household survey data from the 1988, 1995 and 2002 waves of the China Household Income Project, in this paper, we decompose earnings inequality in urban China by using the regression-based decomposition methods developed by Fields (1998), Morduch and Sicular (2002) and Shorrocks (1999). The decomposition results indicate that the effects of gender and membership of the Communist Party of China on earnings inequality have changed little. While work experience had a reduced effect on earnings inequality, the effects of education and occupation have increased. The contributions of ownership status and industry to earnings inequality have increased. Regional effects have been the largest recent contributor to earnings inequality.

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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-021.

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Date of creation: Jan 2009
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Handle: RePEc:hst:ghsdps:gd08-021

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Related research
Keywords: earnings inequality; regression-based decompositions; urban China;

Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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  1. Björn Gustafsson & Shi Li, 2000. "Economic transformation and the gender earnings gap in urban China," Journal of Population Economics, Springer, vol. 13(2), pages 305-329. [Downloadable!] (restricted)
  2. John Knight & Lina Song, 2003. "Increasing urban wage inequality in China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(4), pages 597-619, December. [Downloadable!] (restricted)
  3. Gustafsson, Bjorn & Shi, Li, 2001. "The Anatomy of Rising Earnings Inequality in Urban China," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 118-135, March. [Downloadable!] (restricted)
  4. Meng, Xin & Kidd, Michael P., 1997. "Labor Market Reform and the Changing Structure of Wage Determination in China's State Sector during the 1980s," Journal of Comparative Economics, Elsevier, vol. 25(3), pages 403-421, December. [Downloadable!] (restricted)
  5. Knight, John & Yueh, Linda, 2004. "Job mobility of residents and migrants in urban China," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 637-660, December. [Downloadable!] (restricted)
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  6. Wan, Guanghua, 2002. "Regression-based Inequality Decomposition: Pitfalls and a Solution Procedure," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  7. Wan, Guanghua, 2004. "Accounting for income inequality in rural China: a regression-based approach," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 348-363, June. [Downloadable!] (restricted)
  8. Zhang, Junsen & Zhao, Yaohui & Park, Albert & Song, Xiaoqing, 2005. "Economic returns to schooling in urban China, 1988 to 2001," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 730-752, December. [Downloadable!] (restricted)
  9. Knight, J. & Shi, L. & Renwei, Z., 1999. "A Spatial Analysis of Wages and Incomes in Urban China: Divergent Means, Convergent Inequality," Economics Series Working Papers 99209, University of Oxford, Department of Economics.
  10. Jonathan Morduch & Terry Sicular, 2002. "Rethinking Inequality Decomposition, With Evidence from Rural China," Economic Journal, Royal Economic Society, vol. 112(476), pages 93-106, January. [Downloadable!] (restricted)
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  11. Xin Meng & Junsen Zhang & Pak-Wai Liu, 2000. "Sectoral gender wage differentials and discrimination in the transitional Chinese economy," Journal of Population Economics, Springer, vol. 13(2), pages 331-352. [Downloadable!] (restricted)
  12. Linda Y. Yueh, 2004. "Wage Reforms in China During the 1990s," Asian Economic Journal, East Asian Economic Association, vol. 18(2), pages 149-164, 06. [Downloadable!] (restricted)
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