Economic Reform, Education Expansion, and Earnings Inequality for Urban Males in China, 1988-2007

Xin Meng (), Kailing Shen and Sen Xue ()
Additional contact information
Sen Xue: Jinan University

No 4919, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In the past 20 years the average real earnings of Chinese urban male workers have increased by 350 per cent. Accompanying this unprecedented growth is a considerable increase in earnings inequality. Between 1988 and 2007 the variance of log earnings increased from 0.27 to 0.48, a 78 per cent increase. Using a unique set of repeated cross-sectional data this paper examines the causes of this increase in earnings inequality. We find that the major changes occurred in the 1990s when the labour market moved from a centrally planned system to a market oriented system. The decomposition exercise conducted in the paper identifies the factor that drives the significant increase in the earnings variance in the 1990s to be an increase in the within-education-experience cell residual variances. Such an increase may be explained mainly by the increase in the price of unobserved skills. When an economy shifts from an administratively determined wage system to a market-oriented one, rewards to both observed and unobserved skills increase. The turn of the century saw a slowing down of the reward to both the observed and unobserved skills, due largely to the college expansion program that occurred at the end of the 1990s.

Keywords: China; earnings inequality (search for similar items in EconPapers)
JEL-codes: J31 P2 P3 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2010-04
New Economics Papers: this item is included in nep-cna, nep-dev, nep-hrm, nep-lab and nep-tra
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Citations: View citations in EconPapers (12)

Published - published in: Journal of Comparative Economics, 2013, 41 (1), 227–244

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Working Paper: Economic Reform, Education Expansion, and Earnings Inequality for Urban Males in China, 1988-2007 (2010)
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