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Changes in China's Wage Structure

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  • Ge, Suqin

    () (Virginia Tech)

  • Yang, Dennis T.

    () (University of Virginia)

Abstract

Using a national sample of Urban Household Surveys, we document several profound changes in China's wage structure during a period of rapid economic growth. Between 1992 and 2007, the average real wage increased by 202 percent, accompanied by a sharp rise in wage inequality. Decomposition analysis reveals 80 percent of this wage growth to be attributable to higher pay for basic labor, rising returns to human capital, and increases in the state-sector wage premium. Employing an aggregate production function framework, we account for the sources of wage growth and wage inequality in the face of globalization and economic transition. We find capital accumulation, skill-biased technological change, and export expansion to be the major forces behind the evolving wage structure in China.

Suggested Citation

  • Ge, Suqin & Yang, Dennis T., 2012. "Changes in China's Wage Structure," IZA Discussion Papers 6492, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6492
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    Cited by:

    1. Huang, Yi & Loungani, Prakash & Wang, Gewei, 2014. "Minimum wages and firm employment: evidence from China," Globalization and Monetary Policy Institute Working Paper 173, Federal Reserve Bank of Dallas.
    2. Kuntić Dario, 2015. "The Ominous Triangle: China-Taiwanthe United States relationship," Croatian International Relations Review, De Gruyter Open, vol. 21(72), pages 239-280, February.
    3. Hare, Denise, 2016. "What accounts for the decline in labor force participation among married women in urban China, 1991–2011?," China Economic Review, Elsevier, vol. 38(C), pages 251-266.
    4. Deininger, Klaus & Jin, Songqing & Liu, Shouying & Xia, Fang, 2015. "Household-level impacts of property rights reform in peri-urban China: Evidence from the Chengdu National Experiment," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205753, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    5. Qu, Zhaopeng & Zhao, Zhong, 2017. "Glass ceiling effect in urban China: Wage inequality of rural-urban migrants during 2002–2007," China Economic Review, Elsevier, vol. 42(C), pages 118-144.
    6. Xi Li & Xuewen Liu & Yong Wang, 2015. "A Model of China's State Capitalism," HKUST IEMS Working Paper Series 2015-12, HKUST Institute for Emerging Market Studies, revised Feb 2015.
    7. 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.
    8. Elliott, Robert J.R. & Zhou, Ying, 2015. "Co-location and Spatial Wage Spillovers in China: The Role of Foreign Ownership and Trade," World Development, Elsevier, vol. 66(C), pages 629-644.
    9. Appleton, Simon & Song, Lina & Xia, Qingjie, 2014. "Understanding Urban Wage Inequality in China 1988–2008: Evidence from Quantile Analysis," World Development, Elsevier, vol. 62(C), pages 1-13.
    10. 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).
    11. Wang, Chen & Wan, Guanghua, 2015. "Income polarization in China: Trends and changes," China Economic Review, Elsevier, vol. 36(C), pages 58-72.
    12. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2015. "Offshoring and Directed Technical Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 84-122, July.
    13. Shuaizhang Feng & Yingyao Hu & Robert Moffitt, 2015. "Long Run Trends in Unemployment and Labor Force Participation in China," Working Papers id:7279, eSocialSciences.
    14. Pei-Ju Liao & Ping Wang & Yin-Chi Wang & Chong Kee Yip, 2017. "Educational Choice, Rural-urban Migration and Economic Development," NBER Working Papers 23939, National Bureau of Economic Research, Inc.
    15. repec:eee:jcecon:v:45:y:2017:i:2:p:304-324 is not listed on IDEAS
    16. Dennis Tao Yang, 2012. "Aggregate Savings and External Imbalances in China," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 125-146, Fall.
    17. Gan, Li & Hernandez, Manuel A. & Ma, Shuang, 2016. "The higher costs of doing business in China: Minimum wages and firms' export behavior," Journal of International Economics, Elsevier, vol. 100(C), pages 81-94.
    18. Facchini, Giovanni & Liu, Maggie Y. & Mayda, Anna Maria & Zhou, Minghai, 2018. "China's "Great Migration": The Impact of the Reduction in Trade Policy Uncertainty," IZA Discussion Papers 11279, Institute for the Study of Labor (IZA).
    19. Andrea Fracasso, 2015. "Economic Rebalancing and Growth: the Japanese experience and China’s prospects," DEM Discussion Papers 2015/07, Department of Economics and Management.
    20. Yin-Chi Wang & Ping Wang & Chong Yip & Pei-Ju Liao, 2017. "Educational Choice, Rural-urban Migration and Economic Development: The Role of Zhaosheng in China," 2017 Meeting Papers 738, Society for Economic Dynamics.

    More about this item

    Keywords

    trade expansion; wage growth; technological change; wage inequality; capital accumulation; wage premium; China;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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