IDEAS home Printed from https://ideas.repec.org/p/ris/adbiwp/1283.html
   My bibliography  Save this paper

Skill Formation, Employment Discrimination, and Wage Inequality: Evidence from the People’s Republic of China

Author

Listed:
  • Jun Wang

    (Asian Development Bank Institute)

  • Chengjuan Liao

    (Asian Development Bank Institute)

  • Xuan Wan

    (Asian Development Bank Institute)

  • Hui Song

    (Asian Development Bank Institute)

Abstract

We study the impact of skill formation on employment opportunities and wages. Instead of international trade theory or technological progress theory, we focus on labor “skill formation” to investigate the employment discrimination and skill wage inequality in the PRC's labor market. Based on data from the 2014 China Family Panel Studies, we use cognitive ability and noncognitive ability to measure skill formation. The empirical results show that skill formation has a positive impact on employment opportunities and wages. This result exhibits robustness in tests on monopoly industries and non-monopoly industries, except that there is a certain tendency toward wage equalization in monopoly industries. We also find employment discrimination resulting from skill differences in state-owned and non-state-owned sectors. A similar trend of wage equalization exists in state-owned sectors, while a significant trend of wage differentiation exists between high and low skills in non-state-owned sectors.

Suggested Citation

  • Jun Wang & Chengjuan Liao & Xuan Wan & Hui Song, 2021. "Skill Formation, Employment Discrimination, and Wage Inequality: Evidence from the People’s Republic of China," ADBI Working Papers 1283, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:1283
    as

    Download full text from publisher

    File URL: https://www.adb.org/sites/default/files/publication/736771/adbi-wp1283.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Li, Ben, 2010. "Multinational production and choice of technologies: New evidence on skill-biased technological change from China," Economics Letters, Elsevier, vol. 108(2), pages 181-183, August.
    2. Kampelmann, Stephan & Rycx, François, 2012. "The impact of educational mismatch on firm productivity: Evidence from linked panel data," Economics of Education Review, Elsevier, vol. 31(6), pages 918-931.
    3. Bleakley, Hoyt & Lin, Jeffrey, 2012. "Thick-market effects and churning in the labor market: Evidence from US cities," Journal of Urban Economics, Elsevier, vol. 72(2), pages 87-103.
    4. Vilalta-Bufi, Montserrat, 2010. "On the industry experience premium and labor mobility," Labour Economics, Elsevier, vol. 17(3), pages 547-555, June.
    5. Benoît Mahy & François Rycx & Guillaume Vermeylen, 2015. "Educational Mismatch and Firm Productivity: Do Skills, Technology and Uncertainty Matter?," De Economist, Springer, vol. 163(2), pages 233-262, June.
    6. Hanushek, Eric A. & Schwerdt, Guido & Wiederhold, Simon & Woessmann, Ludger, 2015. "Returns to skills around the world: Evidence from PIAAC," European Economic Review, Elsevier, vol. 73(C), pages 103-130.
    7. Coneus, Katja & Laucht, Manfred & Reuß, Karsten, 2012. "The role of parental investments for cognitive and noncognitive skill formation—Evidence for the first 11 years of life," Economics & Human Biology, Elsevier, vol. 10(2), pages 189-209.
    8. Fuest, Clemens & Thum, Marcel, 2001. "Immigration and skill formation in unionised labour markets," European Journal of Political Economy, Elsevier, vol. 17(3), pages 557-573, September.
    9. Mehta, Aashish & Mohr, Belinda Acuña, 2012. "Economic Liberalization and Rising College Premiums in Mexico: A Reinterpretation," World Development, Elsevier, vol. 40(9), pages 1908-1920.
    10. Svetlana Ridala & Ott Toomet, 2019. "Wage Gap in an Ethnically Segmented Labor Market: The Role of Cognitive Skills," Eastern European Economics, Taylor & Francis Journals, vol. 57(1), pages 20-30, January.
    11. Acosta, Pablo A. & Muller, Noel & Sarzosa, Miguel, 2015. "Beyond Qualifications: Returns to Cognitive and Socio-Emotional Skills in Colombia," IZA Discussion Papers 9403, Institute of Labor Economics (IZA).
    12. T Mengistae, 2001. "Skill formation and job matching effects in wage growth in Ethiopia," Journal of African Economies, Centre for the Study of African Economies, vol. 10(1), pages 1-36.
    13. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    14. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
    15. Selin Sayek & Fuat Şener, 2006. "Outsourcing and Wage Inequality in a Dynamic Product Cycle Model," Review of Development Economics, Wiley Blackwell, vol. 10(1), pages 1-19, February.
    16. Almlund, Mathilde & Duckworth, Angela Lee & Heckman, James & Kautz, Tim, 2011. "Personality Psychology and Economics," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 1-181, Elsevier.
    17. repec:adr:anecst:y:2005:i:79-80:p:12 is not listed on IDEAS
    18. Capatina, Elena, 2014. "Skills and the evolution of wage inequality," Labour Economics, Elsevier, vol. 28(C), pages 41-57.
    19. Raveh, Ohad & Reshef, Ariell, 2016. "Capital imports composition, complementarities, and the skill premium in developing countries," Journal of Development Economics, Elsevier, vol. 118(C), pages 183-206.
    20. Guido Heineck, 2011. "Does it Pay to Be Nice? Personality and Earnings in the United Kingdom," ILR Review, Cornell University, ILR School, vol. 64(5), pages 1020-1038, October.
    21. Eli Berman & Rohini Somanathan & Hong W. Tan, 2010. "Is Skill-Biased Technological Change Here Yet? Evidence from Indian Manufacturing in the 1990s," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 299-321, National Bureau of Economic Research, Inc.
    22. Fryer Jr., Roland G., 2011. "Racial Inequality in the 21st Century: The Declining Significance of Discrimination," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 10, pages 855-971, Elsevier.
    23. Erik Lindqvist & Roine Vestman, 2011. "The Labor Market Returns to Cognitive and Noncognitive Ability: Evidence from the Swedish Enlistment," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 101-128, January.
    24. Serrano, Lorenzo & Timmer, Marcel P., 2002. "Is technical change directed by the supply of skills?: The case of South Korea," Economics Letters, Elsevier, vol. 76(2), pages 289-293, July.
    25. Krishnakumar, Jaya & Nogales, Ricardo, 2020. "Education, skills and a good job: A multidimensional econometric analysis," World Development, Elsevier, vol. 128(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pi, Jiancai & Zhang, Pengqing, 2018. "Skill-biased technological change and wage inequality in developing countries," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 347-362.
    2. Falck, Oliver & Heimisch-Roecker, Alexandra & Wiederhold, Simon, 2021. "Returns to ICT skills," Research Policy, Elsevier, vol. 50(7).
    3. Behar, Alberto, 2025. "The elasticity of substitution between skilled and unskilled labor in developing countries: A directed technical change perspective," Journal of Development Economics, Elsevier, vol. 174(C).
    4. Lisa Simon, 2019. "Microeconometric Analyses on Determinants of Individual Labour Market Outcomes," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 83, September.
    5. Wazah Pello-Esso & Ulf Gerdtham & Sara Larsson Lönn & Jan Sundquist & Kristina Sundquist, 2025. "Immigrant-Native Wage Gap in Sweden: Do Personality Traits Matter?," Journal of International Migration and Integration, Springer, vol. 26(1), pages 467-489, March.
    6. David J. Deming, 2017. "The Growing Importance of Social Skills in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1593-1640.
    7. Piopiunik, Marc & Schwerdt, Guido & Simon, Lisa & Woessmann, Ludger, 2020. "Skills, signals, and employability: An experimental investigation," European Economic Review, Elsevier, vol. 123(C).
    8. Xie, Mengmeng & Ding, Lin & Xia, Yan & Guo, Jianfeng & Pan, Jiaofeng & Wang, Huijuan, 2021. "Does artificial intelligence affect the pattern of skill demand? Evidence from Chinese manufacturing firms," Economic Modelling, Elsevier, vol. 96(C), pages 295-309.
    9. Christina Langer & Simon Wiederhold, 2023. "The Value of Early-Career Skills," Working Papers 222, Bavarian Graduate Program in Economics (BGPE).
    10. Li, Hongbin & Li, Lei & Ma, Hong, 2022. "China's skill-biased imports," China Economic Review, Elsevier, vol. 74(C).
    11. Christophe J Nordman & Leopold R Sarr & Smriti Sharma, 2019. "Skills, personality traits, and gender wage gaps: evidence from Bangladesh," Oxford Economic Papers, Oxford University Press, vol. 71(3), pages 687-708.
    12. Goel, Deepti & Barooah, Bidisha, 2018. "Drivers of Student Performance: Evidence from Higher Secondary Public Schools in Delhi," GLO Discussion Paper Series 231, Global Labor Organization (GLO).
    13. Fan, Jianyong & Liu, Nian & Tang, Wei, 2025. "Skills and the city in China," Regional Science and Urban Economics, Elsevier, vol. 111(C).
    14. Acosta,Pablo Ariel & Muller,Noel & Sarzosa,Miguel Alonso, 2015. "Beyond qualifications : returns to cognitive and socio-emotional skills in Colombia," Policy Research Working Paper Series 7430, The World Bank.
    15. Eva Berger, 2020. "Self-productivity and Cross-productivity in the Process of Skill Formation," Working Papers 2027, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    16. Lennart Ziegler, 2020. "Skill Demand and Posted Wages. Evidence from Online Job Ads in Austria," Vienna Economics Papers 2002, University of Vienna, Department of Economics.
    17. Thor Berger & Carl Benedikt Frey, 2016. "Structural Transformation in the OECD: Digitalisation, Deindustrialisation and the Future of Work," OECD Social, Employment and Migration Working Papers 193, OECD Publishing.
    18. Maria Cinque & Stephanie Carretero & Joanna Napierala, 2021. "Non-cognitive skills and other related concepts: towards a better understanding of similarities and differences," JRC Working Papers on Labour, Education and Technology 2021-09, Joint Research Centre.
    19. Ioannis Vardalachakis & Persefoni Tsaliki, 2015. "The Declining Educational Wage Premium and the Labour Process: Evidence from 15 Selected OECD Countries," Bulletin of Political Economy, Bulletin of Political Economy, vol. 9(1), pages 55-67, June.
    20. Lennart Ziegler, 2020. "Skill Demand and Posted Wages. Evidence from Online Job Ads in Austria," Vienna Economics Papers vie2002, University of Vienna, Department of Economics.

    More about this item

    Keywords

    skill formation; employment discrimination; skill wage inequality;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:adbiwp:1283. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ADB Institute (email available below). General contact details of provider: https://edirc.repec.org/data/adbinjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.