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What Lies behind Rising Earnings Inequality in Urban China? Regression-based Decompositions

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  • Quheng Deng
  • Shi Li

Abstract

Coupled with advances in enterprise reform and changes in the wage structure, earnings inequality in urban China has been increasing, and this has contributed significantly to rising income inequality. Using urban household survey data from the 1988, 1995 and 2002 waves of the China Household Income Project, in this article, we decompose earnings inequality in urban China by using the recently developed regression-based decomposition methods. The decomposition results indicate that the effects of gender and membership of the Communist Party of China on earnings inequality have changed little. While work experience had a reduced effect on earnings inequality, the effects of education and occupation have increased. The contributions of ownership status and industry to earnings inequality have increased. Regional effects have been the largest recent contributor to earnings inequality. (JEL codes: D31, J31, O53) Copyright The Author 2009. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

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  • Quheng Deng & Shi Li, 2009. "What Lies behind Rising Earnings Inequality in Urban China? Regression-based Decompositions," CESifo Economic Studies, CESifo Group, vol. 55(3-4), pages 598-623.
    • Handle: RePEc:oup:cesifo:v:55:y:2009:i:3-4:p:598-623
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    Cited by:

    1. 岩﨑, 一郎 & Iwasaki, Ichiro & 馬, 欣欣 & Ma, Xin Xin, 2019. "現代中国における男女賃金格差: メタ分析による接近," Discussion Paper Series 689, Institute of Economic Research, Hitotsubashi University.
    2. Gustafsson, Björn & Wan, Haiyuan, 2020. "Wage growth and inequality in urban China: 1988–2013," China Economic Review, Elsevier, vol. 62(C).
    3. Magnani, Elisabetta & Zhu, Rong, 2012. "Gender wage differentials among rural–urban migrants in China," Regional Science and Urban Economics, Elsevier, vol. 42(5), pages 779-793.
    4. Xin Meng & Chris Manning & Li Shi & Tadjuddin Nur Effendi (ed.), 2010. "The Great Migration," Books, Edward Elgar Publishing, number 13619.
    5. Xue, Jinjun & Gao, Wenshu & Guo, Lin, 2014. "Informal employment and its effect on the income distribution in urban China," China Economic Review, Elsevier, vol. 31(C), pages 84-93.
    6. Shi Li & Terry Sicular & Finn Tarp, 2018. "Inequality in China: Development, transition, and policy," WIDER Working Paper Series wp-2018-174, World Institute for Development Economic Research (UNU-WIDER).
    7. Ichiro Iwasaki & Xinxin Ma, 2020. "Gender wage gap in China: a large meta-analysis," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 54(1), pages 1-19, December.
    8. Shi Li & Terry Sicular & Finn Tarp, 2018. "Inequality in China: Development, transition, and policy," WIDER Working Paper Series 174, World Institute for Development Economic Research (UNU-WIDER).
    9. Juzhong Zhuang & Shi Li, 2016. "Understanding the Recent Trend of Income Inequality in China," Working Papers 196, Department of Economics, SOAS University of London, UK.
    10. Björn Gustafsson & Haiyuan Wan, 2018. "Wage growth and inequality in urban China: 1988-2013," WIDER Working Paper Series wp-2018-163, World Institute for Development Economic Research (UNU-WIDER).
    11. Cathy Yang Liu & Wen Xie, 2013. "Creativity and Inequality: The Dual Path of China's Urban Economy?," Growth and Change, Wiley Blackwell, vol. 44(4), pages 608-630, December.
    12. Iwasaki, Ichiro & Ma, Xinxin, 2020. "Gender Wage Gap in China: A Large Meta-Analysis," CEI Research Paper Series 2020-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    13. Björn Gustafsson & Haiyuan Wan, 2018. "Wage growth and inequality in urban China: 1988–2013," WIDER Working Paper Series 163, World Institute for Development Economic Research (UNU-WIDER).
    14. Meng, Xin & Shen, Kailing & Xue, Sen, 2013. "Economic reform, education expansion, and earnings inequality for urban males in China, 1988–2009," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 227-244.
    15. Zagler, Martin & Amighini, Alessia & Fang, Weidi, 2023. "On the evolution of the wage premium for party membership in China," Department of Economics Working Paper Series 351, WU Vienna University of Economics and Business.
    16. repec:wyi:journl:002165 is not listed on IDEAS
    17. Zhao Chen & Ming Lu & Guanghua Wan, 2010. "Inter-Industry Wage Differentials: An Increasingly Important Contributor to Urban China Income Inequality," Global COE Hi-Stat Discussion Paper Series gd09-130, Institute of Economic Research, Hitotsubashi University.
    18. Lwin Lwin Aung & Peter Warr, 2021. "Decomposing changes in inequality: Evidence from Myanmar," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1172-1196, August.

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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