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Earnings Differences between Chinese and Indian Wage Earners, 1987–2004

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Author Info

  • Bargain, Olivier

    ()
    (University of Aix-Marseille II)

  • Bhaumik, Sumon K.

    ()
    (University of Sheffield)

  • Chakrabarty, Manisha

    ()
    (Indian Institute of Management)

  • Zhao, Zhong

    ()
    (Renmin University of China)

Abstract

This paper is one of the first comprehensive attempts to compare earnings in urban China and India over the recent period. While both economies have grown considerably, we illustrate significant cross-country differences in wage growth since the late 1980s. For this purpose, we make use of comparable datasets, estimate Mincer equations and perform Oaxaca-Blinder decompositions at the mean and quantile decompositions at different points of the wage distribution. The initial wage differential in favour of Indian workers, observed in the middle and upper part of the distribution, partly disappears over time. While the 1980s Indian premium is mainly due to higher returns to education and experience, a combination of price and endowment effects explains why Chinese wages have caught up, especially since the mid-1990s. The price effect is only partly explained by the observed convergence in returns to education; the endowment effect is driven by faster increase in education levels in China and significantly accentuates the reversal of the wage gap in favour of this country for the first half of the wage distribution.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3284.

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Length: 22 pages
Date of creation: Jan 2008
Date of revision:
Publication status: published in: Review of Income and Wealth, 2009, 55(1), 562-587 [Details & Download]
Handle: RePEc:iza:izadps:dp3284

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Keywords: earnings; India; Oaxaca-Blinder decomposition; returns to education; quantile regression; China;

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References

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  1. Melly, Blaise, 2005. "Decomposition of differences in distribution using quantile regression," Labour Economics, Elsevier, vol. 12(4), pages 577-590, August.
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  4. Jim Albrecht & Aico van Vuuren & Susan Vroman, 2007. "Counterfactual Distributions with Sample Selection Adjustments: Econometric Theory and an Application to the Netherlands," Working Papers gueconwpa~07-07-06, Georgetown University, Department of Economics.
  5. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  6. Albrecht, James & Björklund, Anders & Vroman, Susan, 2001. "Is There a Glass Ceiling in Sweden?," IZA Discussion Papers 282, Institute for the Study of Labor (IZA).
  7. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Rising Wage Inequality: The Role of Composition and Prices," Harvard Institute of Economic Research Working Papers 2096, Harvard - Institute of Economic Research.
  8. Byron, Rayond P & Manaloto, Evelyn Q, 1990. "Returns to Education in China," Economic Development and Cultural Change, University of Chicago Press, vol. 38(4), pages 783-96, July.
  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. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
  11. Geeta Gandhi Kingdon & Jeemol Unni, 2001. "Education and Women's Labour Market Outcomes in India," Education Economics, Taylor & Francis Journals, vol. 9(2), pages 173-195.
  12. Steve Dowrick & Muhammad Akmal, 2005. "Contradictory Trends In Global Income Inequality: A Tale Of Two Biases ," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(2), pages 201-229, 06.
  13. François Bourguignon & Francisco Ferreira & Phillippe Leite, 2008. "Beyond Oaxaca–Blinder: Accounting for differences in household income distributions," Journal of Economic Inequality, Springer, vol. 6(2), pages 117-148, June.
  14. Saha, Bibhas & Sarkar, Subrata, 1999. "Schooling, Informal Experience, and Formal Sector Earnings: A Study of Indian Workers," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 187-99, June.
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Cited by:
  1. Chris SAKELLARIOU, 2009. "Changing Wage Distributions and the Evolution of Wage Inequality in Indonesia:1994 – 2007," Economic Growth centre Working Paper Series 0906, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  2. Banerjee, Abhijit & Duflo, Esther & Ghatak, Maitreesh & Lafortune, Jeanne, 2009. "Marry for What? Caste and Mate Selection in Modern India," CEPR Discussion Papers 7300, C.E.P.R. Discussion Papers.
  3. Manisha Chakrabarty & Sumon Kumar Bhaumik, 2012. "Whither human capital? The woeful tale of transition to tertiary education in India," Applied Economics Letters, Taylor & Francis Journals, vol. 19(9), pages 835-838, June.
  4. Somnath Chattopadhyay, 2011. "Earnings efficiency and poverty dominance analysis: a spatial approach," Economics Bulletin, AccessEcon, vol. 31(3), pages 2298-2318.
  5. Gao, Hang & Marchand, Joseph & Song, Tao, 2011. "The Supply and Demand Factors Behind the Relative Earnings Increases in Urban China at the Turn of the 21st Century," Working Papers 2011-23, University of Alberta, Department of Economics, revised 01 Feb 2012.
  6. Somnath Chattopadhyay & Amita Majumder & Hasanur Jaman, 2014. "Decomposition of inter-regional poverty gap in India: a spatial approach," Empirical Economics, Springer, vol. 46(1), pages 65-99, February.

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