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Wage increases, wage convergence, and the Lewis turning point in China

  • CAI, Fang
  • DU, Yang
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    We examine the wage trends of ordinary workers and the wage convergence between unskilled and skilled workers in China. First, we find that wages in all non-agricultural sectors, wages of migrant workers, and wages of hired workers in the agricultural sector have increased dramatically since 2003. Second, through comparing wage differentials between migrant and urban resident workers and between heterogeneous education groups within migrant workers, and by investigating the changes in the contribution of the returns to education to wage differentials, we find that the wages of unskilled and skilled workers have converged. Both the increasing wage trends and wage convergence are interpreted as evidence supporting the hypothesis that China has passed what can be called the Lewis turning point in the industrial sector. We conclude that the sustainability of economic growth in China requires an upgrading of labor market institutions to accommodate the merging of the rural and urban labor forces.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X11000605
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    Article provided by Elsevier in its journal China Economic Review.

    Volume (Year): 22 (2011)
    Issue (Month): 4 ()
    Pages: 601-610

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    Handle: RePEc:eee:chieco:v:22:y:2011:i:4:p:601-610
    DOI: 10.1016/j.chieco.2011.07.004
    Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

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    8. Ryoshin Minami, 1968. "The Turning Point in the Japanese Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 82(3), pages 380-402.
    9. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    10. Fumio Hayashi & Edward C. Prescott, 2002. "Data Appendix to The 1990s in Japan: A Lost Decade," Technical Appendices hayashi02, Review of Economic Dynamics.
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    13. Freeman, Richard B, 1993. "Labor Markets and Institutions in Economic Development," American Economic Review, American Economic Association, vol. 83(2), pages 403-08, May.
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