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Decomposition of the increase in earnings inequality in urban China: A distributional approach

  • Chi, Wei
  • Li, Bo
  • Yu, Qiumei
Registered author(s):

This study examines changes in Chinese urban income distribution from 1987 to 1996 and 1996 to 2004 using nationwide household data and investigates the causes of these changes. The Firpo, Fortin, and Lemieux (2007, 2009) method based on unconditional quantile regressions is used to decompose changes in income distribution and income inequality measures, such as variance and a 10:90 ratio. The decomposition results show that wage structure effects, such as a widening gender earnings gap, increases in returns to college education, and increases in earnings differentials between industries, company ownership types, and regions, have been the major contributors to the overall increases in income inequality. It was also found that at different points on the income distribution (e.g., the lower or upper half), the contributing factors that increase income inequality are different.

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Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 22 (2011)
Issue (Month): 3 (September)
Pages: 299-312

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Handle: RePEc:eee:chieco:v:22:y:2011:i:3:p:299-312
Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

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  1. Knight, J. & Lina, S., 1990. "The Determinants Of Urban Income Inequality In China," Economics Series Working Papers 9991, University of Oxford, Department of Economics.
  2. Guanghua Wan & Zhangyue Zhou, 2005. "Income Inequality in Rural China: Regression-based Decomposition Using Household Data," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 107-120, 02.
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  15. Gustafsson, Bjorn & Shi, Li, 2001. "The Anatomy of Rising Earnings Inequality in Urban China," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 118-135, March.
  16. Björn Gustafsson & Shi Li, 2000. "Economic transformation and the gender earnings gap in urban China," Journal of Population Economics, Springer, vol. 13(2), pages 305-329.
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