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Decomposition of Changes in Earnings Inequality in China: A Distributional Approach


  • Chi, Wei
  • Li, Bo
  • Yu, Qiumei


Using the nationwide household data, this study examines the changes in the Chinese urban income distributions from 1987 to 1996 and from 1996 to 2004, and investigates the causes of these changes. The Oaxaca-Blinder decomposition method is applied to decomposing the mean earnings increases, and the Firpo-Fortin-Lemieux method based upon a recentered influence function is used to decompose the changes in the income distribution and the inequality measures such as the variance and the 10-90 ratio. The decomposition results show that the wage structure effects such as the widened gender pay gap, the increasing return to college education, and the widened gap in the return to different industries, ownership, and regions, have contributed to most of the overall increases in income inequality. During the different time periods, 1987-1996 and 1996-2004, the impacts of these factors vary at the different points (e.g. the lower half or upper half) of distribution.

Suggested Citation

  • Chi, Wei & Li, Bo & Yu, Qiumei, 2007. "Decomposition of Changes in Earnings Inequality in China: A Distributional Approach," MPRA Paper 3806, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:3806

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    4. Knight, John B & Song, Lina, 1991. "The Determinants of Urban Income Inequality in China," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(2), pages 123-154, May.
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    12. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Rising Wage Inequality: The Role of Composition and Prices," NBER Working Papers 11628, National Bureau of Economic Research, Inc.
    13. Nguyen, Binh T. & Albrecht, James W. & Vroman, Susan B. & Westbrook, M. Daniel, 2007. "A quantile regression decomposition of urban-rural inequality in Vietnam," Journal of Development Economics, Elsevier, vol. 83(2), pages 466-490, July.
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    Cited by:

    1. repec:wsi:serxxx:v:62:y:2017:i:02:n:s021759081550071x is not listed on IDEAS
    2. Chris SAKELLARIOU, 2009. "Changing Wage Distributions and the Evolution of Wage Inequality in Indonesia:1994 – 2007," Economic Growth Centre Working Paper Series 0906, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.

    More about this item


    Earnings inequality; Unconditional Quantile Regressions; Earnings distribution; Decomposition;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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