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The Effects of the Minimum Wage on Earnings Inequality: Evidence from China

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  • Lin, Carl

    () (Bucknell University)

  • Yun, Myeong-Su

    () (Inha University)

Abstract

The minimum wage has been regarded as an important element of public policy for reducing poverty and inequality. Increasing the minimum wage is supposed to raise earnings for millions of low-wage workers and therefore lower earnings inequality. However, there is no consensus in the existing literature from industrialized countries regarding whether increasing the minimum wage has helped lower earnings inequality. China has recently exhibited rapid economic growth and widening earnings inequality. Since China promulgated new minimum wage regulations in 2004, the magnitude and frequency of changes in the minimum wage have been substantial, both over time and across jurisdictions. The growing importance of research on the relationship between the minimum wage and earnings inequality and its controversial nature have sparked heated debate in China, highlighting the importance of rigorous research to inform evidence-based policy making. We investigate the contribution of the minimum wage to the well-documented rise in earnings inequality in China over the period from 2004 to 2009 by using city-level minimum wage panel data and a representative Chinese household survey, and we find that increasing the minimum wage reduces inequality – by decreasing the earnings gap between the median and the bottom decile – over the analysis period.

Suggested Citation

  • Lin, Carl & Yun, Myeong-Su, 2016. "The Effects of the Minimum Wage on Earnings Inequality: Evidence from China," IZA Discussion Papers 9715, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9715
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    Cited by:

    1. Florian Mayneris & Sandra Poncet & Tao Zhang, 2016. "Improving or Disappearing: Firm-Level Adjustments to Minimum Wages in China," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2016027, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    Keywords

    China; earnings inequality; minimum wage;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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