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Industry openness, firm characteristics, and wage inequality: evidence from Chinese manufacturing firms

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  • Qiong Huang
  • Satish Chand

Abstract

Recent literature has cited trade liberalisation as a major cause for the growth of wage inequality in developing countries. This study uses primary data from 670 Chinese manufacturing firms, together with the newly introduced regression-based inequality decomposition method, to investigate the impact of industry openness on wage inequality. The empirical analysis shows that industry openness leads to a positive industry wage premium, and thereby contributes to the inter-industry wage inequality. However, the decomposition results suggest that the contribution industry openness to the wage inequality, although positive, is relatively small at 4.69%. The major contributor to the wage inequality is firms' difference in human capital, which accounted for 14.3%.

Suggested Citation

  • Qiong Huang & Satish Chand, 2017. "Industry openness, firm characteristics, and wage inequality: evidence from Chinese manufacturing firms," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 10(1), pages 98-108.
    • Handle: RePEc:ids:ijepee:v:10:y:2017:i:1:p:98-108
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