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The Effects of the State Sector on Wage Inequality in Urban China: 1988–2007

Author

Listed:
  • Xia, Qingjie

    (Peking University)

  • Song, Lina

    (University of Nottingham)

  • Li, Shi

    (Beijing Normal University)

  • Appleton, Simon

    (University of Nottingham)

Abstract

This paper examines the effects of state sector domination on wage inequality in urban China. Using Chinese Household Income Project surveys, we conduct two exercises: with quantile regression analysis, we identify wage gaps across the distribution and over time; and we employ the Machado and Mata (2005) decomposition to investigate how urban wage inequality was affected by the changes in wage structure and employment share of the state sector. We find that since the radical state sector reforms designed to reduce over-staffing and improve efficiency since the late 1990s, urban wage gaps were narrowed due to the reduction of employment share in the state sector; the wage premium of the state sector in comparison with the non-state sector increased significantly; and changes in the wage structure of the labour market caused the rise in urban wage inequality.

Suggested Citation

  • Xia, Qingjie & Song, Lina & Li, Shi & Appleton, Simon, 2013. "The Effects of the State Sector on Wage Inequality in Urban China: 1988–2007," IZA Discussion Papers 7142, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7142
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    References listed on IDEAS

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    2. Ma, Yuanyuan & Walsh, Patrick Paul, 2013. "Party Membership and State Jobs in Urban China," IZA Discussion Papers 7643, Institute of Labor Economics (IZA).
    3. Christopher Candelaria & Mary Daly & Galina Hale, 2015. "Persistence of Regional Wage Differences in China," Pacific Economic Review, Wiley Blackwell, vol. 20(3), pages 365-387, August.
    4. Loren Brandt & Feitao Jiang & Yao Luo & Yingjun Su, 2022. "Ownership and Productivity in Vertically Integrated Firms: Evidence from the Chinese Steel Industry," The Review of Economics and Statistics, MIT Press, vol. 104(1), pages 101-115, March.
    5. Dosi, Giovanni & Virgillito, Maria Enrica & Yu, Xiaodan, 2020. "The wage-productivity nexus in the world factory economy," World Development, Elsevier, vol. 129(C).
    6. Clemens Fuest & Li Liu, 2015. "Does Ownership Affect the Impact of Taxes on Firm Behavior? Evidence from China," CESifo Working Paper Series 5316, CESifo.
    7. Qi, Di & Wu, Yichao, 2016. "The extent and risk factors of child poverty in urban China — What can be done for realising the Chinese government goal of eradicating poverty before 2020," Children and Youth Services Review, Elsevier, vol. 63(C), pages 74-82.
    8. Yuanyuan Ma & Patrick Paul Walsh & Liming Wang, 2017. "Earnings Premium in State Jobs Across Urban China," Asian Economic Papers, MIT Press, vol. 16(2), pages 167-184, Summer.
    9. Kritkorn Nawakitphaitoon & Xuan Chen & Yuhao Ge, 2016. "State and Non-state Earnings Differentials over Time in China’s Urban Labor Market: Evidence from the Urban Household Survey (1994–2007)," Journal of Labor Research, Springer, vol. 37(3), pages 287-316, September.
    10. Song, Lina & Appleton, Simon & Liang, Zhe, 2016. "Deconstructing Informality: A Response to Vulnerability or an Optimal Choice?," IZA Discussion Papers 10100, Institute of Labor Economics (IZA).
    11. Zhou, Xiaoyao & Ye, Jingjing & Li, Hao & Yu, Hongyan, 2022. "The rising child penalty in China," China Economic Review, Elsevier, vol. 76(C).
    12. Prema†chandra Athukorala & Zheng Wei, 2018. "Economic Transition And Labour Market Dynamics In China: An Interpretative Survey Of The €˜Turning Point’ Debate," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 420-439, April.

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    More about this item

    Keywords

    China; state sector; wage inequality; quantile regression; counterfactual analysis;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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