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Globalization and wage inequality: Evidence from urban China

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  • Han, Jun
  • Liu, Runjuan
  • Zhang, Junsen

Abstract

This paper examines the impact of globalization on wage inequality using Chinese Urban Household Survey data from 1988 to 2008. Exploring two trade liberalization shocks, Deng Xiaoping's Southern Tour in 1992 and China's accession to the World Trade Organization (WTO) in 2001, we analyze whether regions more exposed to globalization experienced larger changes in wage inequality than less-exposed regions. Contrary to the predictions of the Heckscher–Ohlin model, we find that the WTO accession was significantly associated with rising wage inequality. We further show that both trade liberalizations contributed to within-region inequality by raising the returns to education (the returns to high school after 1992 and the returns to college after 2001).

Suggested Citation

  • Han, Jun & Liu, Runjuan & Zhang, Junsen, 2012. "Globalization and wage inequality: Evidence from urban China," Journal of International Economics, Elsevier, vol. 87(2), pages 288-297.
  • Handle: RePEc:eee:inecon:v:87:y:2012:i:2:p:288-297
    DOI: 10.1016/j.jinteco.2011.12.006
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    Cited by:

    1. Mandelman, Federico S., 2016. "Labor market polarization and international macroeconomic dynamics," Journal of Monetary Economics, Elsevier, vol. 79(C), pages 1-16.
    2. repec:eee:wdevel:v:97:y:2017:i:c:p:313-329 is not listed on IDEAS
    3. Jin, Hailong & Qian, Hang & Wang, Tong & Choi, E. Kwan, 2014. "Income distribution in urban China: An overlooked data inconsistency issue," China Economic Review, Elsevier, vol. 30(C), pages 383-396.
    4. repec:eee:inecon:v:109:y:2017:i:c:p:31-42 is not listed on IDEAS
    5. Mark Rosenzweig & Junsen Zhang, 2014. "Co-residence, Life-Cycle Savings and Inter- Generational Support in Urban China," Working Papers 1039, Economic Growth Center, Yale University.
    6. Hu, Cui & Lin, Faqin, 2016. "Product standards and export quality: Micro evidence from China," Economics Letters, Elsevier, vol. 145(C), pages 274-277.
    7. repec:bla:growch:v:48:y:2017:i:3:p:459-486 is not listed on IDEAS
    8. Sampson, Thomas, 2016. "Assignment reversals: Trade, skill allocation and wage inequality," Journal of Economic Theory, Elsevier, vol. 163(C), pages 365-409.
    9. Baek Inmee & Shi Qichao, 2016. "Impact of Economic Globalization on Income Inequality: Developed Economies vs Emerging Economies," Global Economy Journal, De Gruyter, vol. 16(1), pages 49-61, March.
    10. repec:eee:chieco:v:46:y:2017:i:c:p:67-86 is not listed on IDEAS
    11. Luo, Dongdong & Xing, Chunbing, 2016. "Population adjustments in response to local demand shifts in China," Journal of Housing Economics, Elsevier, vol. 33(C), pages 101-114.
    12. Han, Jun & Liu, Runjuan & Ural Marchand, Beyza & Zhang, Junsen, 2016. "Market structure, imperfect tariff pass-through, and household welfare in Urban China," Journal of International Economics, Elsevier, vol. 100(C), pages 220-232.
    13. Lee, Wai Choi & Cheong, Tsun Se & Wu, Yanrui, 2017. "The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach," ADBI Working Papers 651, Asian Development Bank Institute.
    14. Guangrong Ma & Jianwei Xu & Shi Li, 2015. "The Income Redistribution Effect Of China'S Personal Income Tax: What The Micro-Data Say," Contemporary Economic Policy, Western Economic Association International, vol. 33(3), pages 488-498, July.
    15. LEE, Jong-Wha & Wie, Dainn, 2017. "Wage Structure and Gender Earnings Differentials in China and India," World Development, Elsevier, vol. 97(C), pages 313-329.
    16. Theresa M. Greaney & Yao Li, 2013. "Trade, Foreign Direct Investment and Wage Inequality in China: A Heterogeneous Firms Approach," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 1-49.
    17. Sheng, Liugang & Yang, Dennis T., 2017. "Offshoring and Wage Inequality: Theory and Evidence from China," IZA Discussion Papers 10924, Institute for the Study of Labor (IZA).
    18. Lin, Faqin & Fu, Dahai, 2016. "Trade, Institution Quality and Income Inequality," World Development, Elsevier, vol. 77(C), pages 129-142.
    19. Ahmed, Wasim & Hussain, Safdar & Jafar, Rana Muhammad Sohail & Guang-Ju, Wang & Rabnawaz, Ambar & Saqib, Zulkaif Ahmed & JianZhou, Yang, 2016. "Impacts of Trade Liberalization on Dairy Industry in China," MPRA Paper 70385, University Library of Munich, Germany.
    20. Hu, Cui & Lin, Faqin & Tan, Yong & Tang, Yihong, 2017. "How Exporting Firms Respond to Technical Barriers to Trade?," MPRA Paper 80946, University Library of Munich, Germany.

    More about this item

    Keywords

    Wage inequality; Skill premium; Globalization; China;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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