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Decomposition of Changes in Earnings Inequality in China: A Distributional Approach

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  • Chi, Wei
  • Li, Bo
  • Yu, Qiumei

Abstract

Using the nationwide household data, this study examines the changes in the Chinese urban income distributions from 1987 to 1996 and from 1996 to 2004, and investigates the causes of these changes. The Oaxaca-Blinder decomposition method is applied to decomposing the mean earnings increases, and the Firpo-Fortin-Lemieux method based upon a recentered influence function is used to decompose the changes in the income distribution and the inequality measures such as the variance and the 10-90 ratio. The decomposition results show that the wage structure effects such as the widened gender pay gap, the increasing return to college education, and the widened gap in the return to different industries, ownership, and regions, have contributed to most of the overall increases in income inequality. During the different time periods, 1987-1996 and 1996-2004, the impacts of these factors vary at the different points (e.g. the lower half or upper half) of distribution.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3806.

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Date of creation: Jul 2007
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Handle: RePEc:pra:mprapa:3806

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Keywords: Earnings inequality; Unconditional Quantile Regressions; Earnings distribution; Decomposition;

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  1. 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.
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  3. Knight, J. & Lina, S., 1990. "The Determinants Of Urban Income Inequality In China," Economics Series Working Papers 9991, University of Oxford, Department of Economics.
  4. Xin Meng, 1998. "Gender occupational segregation and its impact on the gender wage differential among rural-urban migrants: a Chinese case study," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 30(6), pages 741-752.
  5. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
  6. Maurer-Fazio, Margaret & Hughes, James, 2002. "The Effects of Market Liberalization on the Relative Earnings of Chinese Women," Journal of Comparative Economics, Elsevier, vol. 30(4), pages 709-731, December.
  7. Binh Nguyen & James Albrecht & Susan Vroman & Daniel Westbrook, 2003. "A Quantile Regression Decomposition of Urban-Rural Inequality in Vietnam," Working Papers gueconwpa~03-03-31, Georgetown University, Department of Economics.
  8. 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.
  9. Ganguli, Ina & Terrell, Katherine, 2006. "Institutions, markets and men's and women's wage inequality: Evidence from Ukraine," Journal of Comparative Economics, Elsevier, vol. 34(2), pages 200-227, June.
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  11. Guanghua Wan & Zhangyue Zhou, 2005. "Income Inequality in Rural China: Regression-based Decomposition Using Household Data," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 9(1), pages 107-120, 02.
  12. 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.
  13. 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., John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
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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, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre 0906, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.

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