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Earnings Differences Between Chinese And Indian Wage Earners, 1987-2004

Author

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  • Olivier Bargain
  • Sumon Kumar Bhaumik
  • Manisha Chakrabarty
  • Zhong Zhao

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 at different points of the wage distribution. The initial wage differential in favor 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 favor of this country for the first half of the wage distribution. Copyright 2009 The Authors. Journal compilation International Association for Research in Income and Wealth 2009.

Suggested Citation

  • Olivier Bargain & Sumon Kumar Bhaumik & Manisha Chakrabarty & Zhong Zhao, 2009. "Earnings Differences Between Chinese And Indian Wage Earners, 1987-2004," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(s1), pages 562-587, July.
  • Handle: RePEc:bla:revinw:v:55:y:2009:i:s1:p:562-587
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. Abhijit Banerjee & Esther Duflo & Maitreesh Ghatak & Jeanne Lafortune, 2013. "Marry for What? Caste and Mate Selection in Modern India," American Economic Journal: Microeconomics, American Economic Association, vol. 5(2), pages 33-72, May.
    4. Prashant Bharadwaj & Leah K. Lakdawala & Nicholas Li, 2013. "Perverse Consequences of Well Intentioned Regulation: Evidence from India's Child Labor Ban," NBER Working Papers 19602, National Bureau of Economic Research, Inc.
    5. Almas Heshmati & Biwei Su, 2017. "Analysis Of Gender Wage Differential In China’S Urban Labor Market," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(02), pages 423-445, June.
    6. Somnath Chattopadhyay, 2011. "Earnings efficiency and poverty dominance analysis: a spatial approach," Economics Bulletin, AccessEcon, vol. 31(3), pages 2298-2318.
    7. Somnath Chattopadhyay, 2014. "Analysis Of Poverty And Efficiency: An Earnings Frontier Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 66(2), pages 133-155, April.
    8. Hang Gao & Joseph Marchand & Tao Song, 2013. "The Supply and Demand Factors Behind the Relative Earnings Increases in Urban China at the Turn of the 21st Century," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(1), pages 121-143, March.
    9. Cai, Lixin & Liu, Amy Y.C., 2015. "Wage determination and distribution in urban China and Vietnam: A comparative analysis," Journal of Comparative Economics, Elsevier, vol. 43(1), pages 186-203.
    10. Esenaliev, Damir & Steiner, Susan, 2014. "Ethnicity and the distribution of welfare: Evidence from southern Kyrgyzstan," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 970-982.
    11. João Pereira & Maria Aurora Galego, 2015. "Inter-Country Wage Differences in the European Union," CEFAGE-UE Working Papers 2015_15, University of Evora, CEFAGE-UE (Portugal).
    12. Chris SAKELLARIOU, 2009. "Changing Wage Distributions and the Evolution of Wage Inequality in Indonesia:1994 – 2007," Economic Growth Centre Working Paper Series 0906, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.

    More about this item

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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