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

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  • Deng Quheng
  • Li Shi
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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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Keywords: earnings inequality; regression-based decompositions; urban China;

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  1. 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.
  2. Wan, Guanghua, 2002. "Regression-based Inequality Decomposition: Pitfalls and a Solution Procedure," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Jonathan Morduch & Terry Sicular, 1998. "Rethinking Inequality Decomposition, with Evidence from Rural China," Harvard Institute of Economic Research Working Papers 1831, Harvard - Institute of Economic Research.
  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.
  5. Bourguignon, Francois & Fournier, M & Gurgand, M, 2001. "Fast Development with a Stable Income Distribution: Taiwan, 1979-94," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(2), pages 139-63, June.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
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Cited by:
  1. repec:wii:bpaper:bowp:084 is not listed on IDEAS
  2. Magnani, Elisabetta & Zhu, Rong, 2012. "Gender wage differentials among rural–urban migrants in China," Regional Science and Urban Economics, Elsevier, vol. 42(5), pages 779-793.
  3. repec:wyi:journl:002165 is not listed on IDEAS
  4. Meng, Xin & Shen, Kailing & Xue, Sen, 2013. "Economic reform, education expansion, and earnings inequality for urban males in China, 1988–2009," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 227-244.

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