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Inter-Industry Wage Differentials: An Increasingly Important Contributor to Urban China Income Inequality

  • Zhao Chen
  • Ming Lu
  • Guanghua Wan

How significantly inter-industry wage differentials contribute to rising income inequality is an essential policy issue for transitional economies. Using regression-based inequality decomposition, this paper finds that inter-industrial wage differentials contributed increasingly to income inequality in urban China through 1988, 1995, and 2002, mainly due to rapid income growth in monopolistic industries. Factors such as region, education, ownership, occupation, and holding a second job also contribute increasingly to income inequality, while being employed the whole year and age have decreasing contributions. If China seeks to reduce urban income inequality, removing entry barriers in the labor market and breaking monopoly power in the goods market are essential policy prescriptions.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd09-130.pdf
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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd09-130.

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Date of creation: Mar 2010
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Handle: RePEc:hst:ghsdps:gd09-130
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