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Changes in China's Wage Structure

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  • Ge, Suqin

    ()
    (Virginia Tech)

  • Yang, Dennis T.

    ()
    (University of Virginia)

Abstract

Using a national sample of Urban Household Surveys, we document several profound changes in China's wage structure during a period of rapid economic growth. Between 1992 and 2007, the average real wage increased by 202 percent, accompanied by a sharp rise in wage inequality. Decomposition analysis reveals 80 percent of this wage growth to be attributable to higher pay for basic labor, rising returns to human capital, and increases in the state-sector wage premium. Employing an aggregate production function framework, we account for the sources of wage growth and wage inequality in the face of globalization and economic transition. We find capital accumulation, skill-biased technological change, and export expansion to be the major forces behind the evolving wage structure in China.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6492.

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Length: 47 pages
Date of creation: Apr 2012
Date of revision:
Publication status: forthcoming in: Journal of European Economic Association, 2014, 12 (2)
Handle: RePEc:iza:izadps:dp6492

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Keywords: wage premium; wage inequality; capital accumulation; technological change; wage growth; trade expansion; China;

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References

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  1. Ge, Suqin & Yang, Dennis Tao, 2011. "Labor market developments in China: A neoclassical view," China Economic Review, Elsevier, Elsevier, vol. 22(4), pages 611-625.
  2. Chris Papageorgiou & John Duffy & Fidel Perez-Sebastian, . "Capital-Skill complementarity? Evidence from a Panel of Countries," Departmental Working Papers, Department of Economics, Louisiana State University 2003-12, Department of Economics, Louisiana State University.
  3. Loren Brandt & Trevor Tombe & Xiadong Zhu, 2013. "Factor Market Distortions Across Time, Space, and Sectors in China," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 39-58, January.
  4. Albert G. Z. Hu & Gary H. Jefferson & Qian Jinchang, 2005. "R&D and Technology Transfer: Firm-Level Evidence from Chinese Industry," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 780-786, November.
  5. Donghoon Lee & Kenneth I. Wolpin, 2006. "Accounting for Wage and Employment Changes in the U.S. from 1968-2000: A Dynamic Model of Labor Market Equilibrium," 2006 Meeting Papers, Society for Economic Dynamics 172, Society for Economic Dynamics.
  6. 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.
  7. Shing-Yi Wang, 2011. "State Misallocation and Housing Prices: Theory and Evidence from China," American Economic Review, American Economic Association, American Economic Association, vol. 101(5), pages 2081-2107, August.
  8. Song, Zheng Michael & Storesletten, Kjetil & Zilibotti, Fabrizio, 2009. "Growing like China," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7149, C.E.P.R. Discussion Papers.
  9. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
  10. Dong, Xiao-Yuan & Putterman, Louis, 2003. "Soft budget constraints, social burdens, and labor redundancy in China's state industry," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 110-133, March.
  11. John Knight & Lina Song, 2003. "Increasing urban wage inequality in China," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 11(4), pages 597-619, December.
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Cited by:
  1. Appleton, Simon & Song, Lina & Xia, Qingjie, 2014. "Understanding Urban Wage Inequality in China 1988–2008: Evidence from Quantile Analysis," World Development, Elsevier, Elsevier, vol. 62(C), pages 1-13.
  2. Dennis Tao Yang, 2012. "Aggregate Savings and External Imbalances in China," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 26(4), pages 125-46, Fall.
  3. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2014. "Offshoring and Directed Technical Change," Working Papers 735, Barcelona Graduate School of Economics.
  4. Atsushi Inoue & Lu Jin & Barbara Rossi, 2014. "Window Selection for Out-of-Sample Forecasting with Time-Varying Parameters," Working Papers 768, Barcelona Graduate School of Economics.

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