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This study examines changes in Chinese urban income distribution from 1987 to 1996 and 1996 to 2004 using nationwide household data and investigates the causes of these changes. The Firpo, Fortin, and Lemieux (2007, 2009) method based on unconditional quantile regressions is used to decompose changes in income distribution and income inequality measures, such as variance and a 10:90 ratio. The decomposition results show that wage structure effects, such as a widening gender earnings gap, increases in returns to college education, and increases in earnings differentials between industries, company ownership types, and regions, have been the major contributors to the overall increases in income inequality. It was also found that at different points on the income distribution (e.g., the lower or upper half), the contributing factors that increase income inequality are different.
State-owned enterprises (SOEs) in China pay higher wages than private firms. Is it because SOEs pay their workers wage premium or because they employ high-quality workforce? Using the latest methods and data, this paper accounts for the unobserved heterogeneity and estimates the SOE wage premium for the period 1995–2013. It is found that the wage premium has diminished since 1995 and has become insignificant since 2000. The significant wage gap between SOEs and non-SOEs can be explained by the fact that SOEs recruit high-quality workforce in correlation with SOEs’ industrial composition. This paper also evaluates the instruments used in the previous studies and rejects them through validity tests. The evidence suggests that the labour market in China is not segmented by ownership.
... This literature, initially focused mainly on the regions of Western Europe and Latin America, but recently it has also been extended to other regions like Africa and Asia (see, e.g., Bourguignon et al. 2007;Lefranc et al. 2008;Cogneau and Mesplé-Somps 2008;Barros et al. 2008;Ferreira and Gignoux 2011). Some recent studies have also covered India and China (e.g., Banerjee and Piketty 2003;Deaton and Dreze 2002;Gaiha et al. 2007;Singh 2012;Gang et al. 2008;Zhang and Eriksson 2010;Chi et al. 2011). ...
The affirmative action policy for socially and economically backward communities in employment has been a debated issue in India. In this context, this paper aims to analyze the level of inequality by distinguishing between ‘circumstance’ and ‘effort’ factors in the Roemer’s framework on equality of opportunity. We measure inequality of opportunities due to two circumstances: caste and religion. Our empirical analysis, at state-level, utilizes a recent household survey data, which provides information related to efforts as well as circumstances of workers. The paper estimated inequality in the labour market and then decomposed it to know the circumstances that cause income inequality. Our estimates indicated that inequality and inequality of opportunity is substantially higher in India. Specifically, the outcome of our analysis evidently indicated that the socially backward communities do have economically disadvantageous position in some of the Indian states. However, the degree of circumstances based on inequality varies to a great extent among the states. Therefore, we suggest that the country does not need a nation-level affirmative action policy instead a state-level policy could be more appropriate as the intensity of the problem differ significantly among the Indian states.
... As Autor et al.  has pointed out, these methods concentrate on the mean of the wage distribution and hence provide a limited understanding of the gender gap. More recent studies have examined gender earnings gaps across an earnings distribution and have not used a simple mean comparison, notably Barsky et al. , Chi et al.  , Ge et al.  and Li et al. . This kind of analysis can provide more information which may be hidden in the mean-level analysis and can help to expose the real situation in regard to the earning gaps among different groups. ...
... At the height of the socialist period, women in China had some of the highest labor force participation rates in the world (UNDP 1995). Recently, those rates have declined and gender gap in wages has increased (Appleton et al. 2014;Berik et al. Chi et al. 2011), suggesting that women's position in the labor market has deteriorated (Zhang et al. 2004;Wang 2005;Li and Li 2008). The worsening trend is concentrated among mothers (Zhang and Hannum 2015;Zhang et al. 2008). ...
Chinese women have reached a high level of labor force participation before China’s deepening economic reform starting from the early 1990s, while women’s deteriorating position in the labor market has been documented in recent literature. However, few studies connect the relationship between the presence of children at different ages and women’s labor market outcomes. Capitalizing on longitudinal data, this study uses a person-fixed-effects model to investigate the relationship between motherhood stages and women’s economic outcomes in urban China. It takes into consideration the impact of children at various ages, as well as the impact of growth in local economies. We find that very young children inhibit mothers’ employment, but the presence of school-aged children is positively correlated with mothers’ income. Our analysis further suggests that, with the development of local economies, the negative association of very young children and women’s labor activity is exacerbated, while the positive relationship between school-aged children and mothers’ income is weakened. Our findings also contribute to the literature on labor market institutions, gender-role ideologies, and the impact on women’s economic outcomes as they balance work with childrearing obligations.
... At the height of the socialist period, women in China had some of the highest labor force participation rates in the world (UNDP 1995(UNDP , 1995. Recently, those rates have declined and gender gap in wages has increased (Appleton, Song, and Xia 2014;Berik, Dong, and Summerfield 2007;Chi, Li, and Yu 2011), suggesting that women's position in the labor market has deteriorated (Zhang et al. 2004;Li and Li 2008). The worsening trend is concentrated among mothers (Zhang and Hannum 2015;Zhang, Hannum, and Wang 2008). ...
China has witnessed profound socioeconomic changes over the past four decades. This dissertation is comprised of three papers that investigate the demographic, social, and economic determinants of fertility trends in China. In Chapter 1, I discuss how birth control policies, which have been implemented since 1980, are related to Chinese women’s timing of giving first birth during a period with substantial socioeconomic development. The results suggest that such birth control policies still influence women’s childbearing behavior, even after controlling for the urban/rural distinction and provincial variation; however, this influence has diminished over time. In Chapter 2, I examine the relationship between different motherhood stages and urban women’s economic positions in the labor market between 1991 and 2011, and how this relationship has changed with the development of local economies. The analysis shows that very young children have an inhibiting effect on mothers’ labor force activities, and this effect is exaggerated with the development of local economies. On the other hand, women’s income is positively correlated with the presence of school-aged children, but this positive relationship is eroded with local economic development. In Chapter 3, I propose that the legacies from state socialism, the reduction in educational gender inequality, and the marketization process lead to a modern-traditional mosaic that shapes a curvilinear relationship between gender-role ideology and fertility intentions in China. Capitalizing on three waves of data from the Chinese General Social Survey, I empirically explore the relationship between women’s fertility intentions of having two or more children and different gender-role attitudes by using structural equation modeling. The results suggest that both the ‘modern’ (with more egalitarian gender-role ideology) and ‘traditional’ (with less egalitarian gender-role ideology) women show higher fertility intentions.
... This result suggests that a change in wage structure was the primary reason for the wage earnings growth observed between these two survey years in Bangladesh. This result supports the view that the wage structure effect is the main contributor to overall increases in wage inequality (Chi, Li, and Yu 2011). Hence, the increase in wage inequality in this period is distributed over the entire wage earnings distribution. ...
This paper reports on an investigation into changes in wage inequality in Bangladesh between 2000 and 2010, based on gender, marital status, education, job industry, job sector, location, etc. The 2000 and 2010 Labour Force Surveys conducted by the Bangladesh Bureau of Statistics (BBS) provided the data used. Oaxaca–Blinder’s (1973) decomposition and regression of the (recentered) influence function (RIF) model of Firpo–Fortin–Lemieux (FFL)’s (2007) decomposition were used to identify the important factors that caused wage inequality in Bangladesh. Both methods showed that the coefficient effect is the main contributor to the overall increase in wage inequality.
... Using China Statistics Yearbook's grouped data, Wu and Perloff  restored income distribution for all residents for 1985-2001 and revealed an income inequality in China. Using the same method, Wang  studied income distribution in China's urban and rural areas and Chi et al.  analyzed the income distribution in these areas from 1987 to 2004. In short, these studies employed nonparametric estimation methods. ...
Data insufficiency has become the primary factor affecting research on income disparity in China. To resolve this issue, this paper explores Chinese income distribution and income inequality using distribution functions. First, it examines 20 sets of grouped data on family income between 2005 and 2012 by the China Yearbook of Household Surveys, 2013, and compares the fitting effects of eight distribution functions. The results show that the generalized beta distribution of the second kind has a high fitting to the income distribution of urban and rural residents in China. Next, these results are used to calculate the Chinese Gini ratio, which is then compared with the findings of relevant studies. Finally, this paper discusses the influence of urbanization on income inequality in China and suggests that accelerating urbanization can play an important role in narrowing the income gap of Chinese residents.
... The different waves of CHIP surveys are drawn from the annual UHS and use similar definitions. Therefore, it is not surprising, but it is reassuring, that studies on wage inequality and wage determinants that have used CHIP and UHS report results that typically agree. 2 In addition to 2 Examples of studies based on UHS are Ng (2007), who, like Chi and Li (2008), studied the gender income gap, and Chi et al. (2011), who studied the increase in earnings inequality between 1987and 1996and between 1996and 2004. Han et al. (2012 investigated globalization (as indicated by Deng Xiaoping's 1992 southern tour and the 2001 World Trade Organization accession) and wage inequality in the period 1988-2008. ...
... These methods concentrate on the mean of the wage distribution, hence they provide a limited understanding of gender gap (Autor et al., 2006). Later, there was surging interest in examining gender earnings gaps across an earnings distribution, not just a simple mean comparison (Albrecht et al., 2003;Barsky et al., 2002;Chi & Li, 2008;Chi et al., 2011;Ge et al., 2011;Li & Dong, 2011). These kinds of analyses can provide more information which may be hidden in the mean-level analysis and can help to test the real situation of earnings gaps among different earnings groups (Ge et al., 2011;Sakellariou, 2012). ...
Market-oriented economic reform has gone through several key stages to bring substantial changes to the current Chinese economy. It accelerated after 1992, and ushered in the pattern transformation since ‘scientific development outlook’ raised in 2002. During this dramatic and complicated economic transitional process, issues regarding income distribution caught people's attention including: How does the earnings distribution change between genders from an early market economy to a post market economy? How do education, work experience, marriage and other factors affect gender earnings and what is the difference among an internal group of women? In this paper, we use data from the Chinese Household Income Projects (2002 and 2007) to analyse the earnings disparity between genders and a female inner group. The unconditional quantile regression finds that the negative effects on earnings of marriage and taking care of children has significantly decreased since 2002, especially for women. But the high return rate to education of female workers is not as significant as before, and the return rate to work experience is falling even faster. Along with the increasing gender earnings gap, the unexplained gap (gender discrimination) has also increased over time and is particularly pronounced in the female higher earnings group.
... As an individual's income consists of both wage and non-wage income, rising income inequality may be caused by widening wage inequality as well as non-wage inequalities. Previous research on income inequality in China has mostly focused on wage inequality and discovered that the changes in the wage structure, e.g. the increasing returns to education and widened wage gaps between gender, industry, occupations, and regions, have led to the rising wage inequality in urban China (Chi et al., 2011;Meng, 2004;Appleton et al., 2005;Gustafsson and Li, 2001a;Song, 2003, 1991). In contrast to many studies on wage inequality, there are relatively few studies that have focused on inequality in non-wage income, specifically capital income. ...
Using urban household survey data collected by National Bureau of Statistics of China from 1988-2009, this study examines the distribution, composition, and changes of capital income and its contribution to income inequality. The data shows that capital income has increased considerably in past 20 years in urban China. Although the average value of capital income is still relatively low, the dispersion of capital income is significant, and for high-income earners capital income is substantial. Compared to other forms of income, capital income is distributed the most unequally, and its contribution to total income inequality has been growing. This study also examines capital income in China’s western, central, and eastern regions separately, and finds that capital income is highest and contributes the most to income inequality in the eastern region.
... 2 As a second contribution, toward enhanced understanding of between-group inequalities, we decompose income gaps using differences in households' observable endowments, differences in the returns to those endowments as well as other between-group differences at various quantiles of national income distributions, using a recently advanced estimation technique -Blinder-Oaxaca decomposition under the structure of unconditional quantile regression. With some exceptions (Chamarbagwala 2010, Chi et al. 2011, Azam 2012, Chang 2012, Appleton et al. 2014, Belhaj Hassine 2014, Yokoyama et al. 2016, Ramadan 2018, this approach has not been utilized adequately in decomposing income inequality in developing Asian countries, particularly in a cross-country setting. ...
This study applies unconditional quantile regressions estimated using recentered influence functions to analyze income gaps based on households’ residence, education and employment status in six Asian countries. China, India, Japan, Korea, Russia and Taiwan are found to represent different demographic corners of Asia and different stages of development. Rural/urban gaps exist across all six countries, particularly China, India and Russia, but have been falling in Russia. Rural households face mobility barriers and lack decent employment opportunities, thus lacking incentives for skill investment. Gaps between less/more educated households are also prevalent. Less educated households tend to be rural and face low returns on their other marketable characteristics. In China and India, gaps by employment status surprisingly favor households with non-employed heads. In India, a non-working class of rural rich live off saved wealth or remittances from urban professionals. In China, a class of rural poor appear to live off remittances from migrant laborers. We conclude that Asian emerging economies should strengthen their rural assistance programs, and lower the mobility and resettlement barriers, to improve rural households’ access to education and employment.
... Based on group income data from the China Statistical Yearbook, Wu and Perloff (2005) restored income distribution data from 1985 to 2001 and calculated Chinese residents' income inequality. Using this method and data source, Chi et al. (2011) analyzed Chinese urban residents' income distribution from 1987 to 2004. We account for the influence of inflation and differing consumer price indexes on the urban-rural accumulated income Gini coefficient by uniformly adjusting the income of urban and rural residents in different years by using a single year (1978) as a benchmark. ...
Previous studies on the income gap between rural and urban areas have concentrated mainly on the flow factor in the income measure. This study investigates income inequality between rural and urban residents during 1978–2014 in China based on both urban–rural flow and the accumulated income Gini coefficient. In addition, the study compares the general changes in trends in these Gini coefficients in terms of urbanization and the ratio of urban-to-rural average income by decomposing the Gini ratios. The results show that the Gini coefficient of flow income has an inverted U-shaped pattern, while the Gini coefficient of accumulated income decreases significantly in most years, showing a decreasing trend since China’s economic reform and opening, with a time lag and fluctuation. Thus, either the accumulated or flow income Gini coefficients decline continuously as urbanization progresses, which could help governments craft fair policies to promote urbanization, narrowing the income gap between rural and urban areas.
This paper analyzes income inequality in China's Economic and Technological Development Zones (ETDZs) and High-Tech Industrial Development Zones (HIDZs). ETDZs and HIDZs are development zones located within cities that have preferential policies aimed at promoting technology and industry, and have served as instruments for attracting foreign direct investment, fomenting trade performance, stimulating scientific research, and upgrading specific industries in China. This paper uses the China Household Income Project Surveys for 1995 and 2002, which have an urban dataset covering over 6000 households and 20,000 individuals from up to 70 cities and 12 provinces. The spatial decomposition of inequality shows that cities with a zone, whether it is an ETDZ or HIDZ, have higher incomes and lower income inequality than cities without any zone. Furthermore, the gap in income inequality between cities with and without ETDZs seems to be converging, while the gap between cities with and without HIDZs is increasing because income inequality in cities with HIDZs has decreased. Lastly, while cities that have no zones have the lowest income and inequality measures, cities that have only one zone, ETDZ or HIDZ, have higher income and lower inequality measures than cities that have both an ETDZ and HIDZ.
Unlike previous studies, in this paper we estimate the contribution of covariates for the regional wage decomposition components along the wage distribution employing a method first described in 2009 by S Firpo, N Fortin, and T Lemieu ( Econometrica 77 953–973). We consider the case of Portugal, a country with persistent and large regional wage gaps. We find that education, occupation, and firm size are the most important factors in explaining the growing importance of the composition effect. The wage structure effect, in turn, is mainly determined by differences in reward for experience and tenure. Moreover, we conclude that the importance of these covariates for both effects is not equal along the wage distribution. Keywords: regions, wage differentials, wage decompositions, unconditional quantile regression, recentred influence function
This paper investigates the income redistribution effect of Personal Income Tax (PIT) policy in China since 1997. During a period of constant PIT policy before 2005, as average personal income increased, though the tax progressivity decreased, the income redistribution effect of PIT improved. The tax reform starting from 2006 made tax progressivity higher but the average effective tax rate lower, thereby weakening the income redistribution effect of PIT policy. Thus, it is the average effective tax rate rather than the progressivity that determines the income redistribution effect of PIT policy. Further analysis shows that the growth of wage and salary income, especially for the middle-income people, contributes most to the rise of the effective tax rate. China has to balance between a heavy tax burden and deteriorating income redistribution effects of PIT policy. A cross-country comparison shows that China has a lower personal income tax burden and higher progressivity than developed countries, but that does not necessarily mean China should raise tax rate in the short run, because lower PIT rates are a common feature of developing countries and are related to the development stage and feasibility of the tax policy.
This paper examines whether cities with preferential policies have higher inequality in household disposable income per capita than cities without preferential policies in urban China. “Preferential policies” refers to the autonomy and deregulation given to Special Economic Zones (SEZs) and Open Cities, allowing them to experiment with market policies and reforms, as the country moves from a state-controlled economy towards a market-oriented economy. While the effect of these policies on economic growth is extensively documented, their relationship with income inequality remains undetermined. Subgroup decompositions of income inequality, using the China Household Income Project's urban datasets of over 6000 households and 20,000 individuals from of up to 70 cities from 12 provinces, were used to identify income inequality gaps between cities with and without preferential policies. The results reveal that while income inequality increased in urban China from 1988 to 2007, the change was lower for cities awarded preferential policies across regions. Furthermore, the decompositions by region indicate that cities receiving preferential policy treatment had higher income growth but a lesser increase in income inequality than cities without preferential policies in each region. Finally, cities receiving preferential policies were able to increase the share of income of the poorest 40% of households while reducing the share of the richest 10%.
Prior country case studies show substantial wage premiums in the financial sector contributes to growth of top incomes and wage inequality in a select group of advanced economies. However, while comparative studies show financialization exerts heterogenous effects on wage inequality across advanced economies, it is unclear whether the magnitude and location of financial wage premium in the distribution of income varies across advanced economies. We address this gap in the empirical literature by examining the financial wage premium across the labor income distributions of 13 advanced economies since the 1980s using harmonized labor force data from multiple waves of the Luxembourg Income Study. Consistent with prior studies, we find the financial wage premium is concentrated at the upper end of the income distribution in most advanced economies, but the magnitude of the premium substantially varies across these economies. We account for this variation by showing the market structure of financial systems exacerbates the financial wage premium at the upper end of the distribution. Overall, this study shows the financial wage premium is an important distributional mechanism for understanding the growth of top incomes and wage inequality in advanced economies and the marketization of financial activity amplifies the wage dynamics of financialization.
The purpose of this paper is to study convergence and income mobility of China’s rural households.
The data of rural household income per capita are employed to compute the transitional dynamics in the rural sector. The analyses are conducted at two spatial levels, namely, the national and provincial levels. Ergodic distributions are computed to provide a forecast of future income distributions, whereas Mobility Probability Plots are constructed to offer detailed information on the transitional dynamics.
The income distributions are found to have considerable persistence. Another finding is that most of the households (except the extremely low-income households) have a tendency of moving downwards in the income distribution though they are more likely to remain in the same levels of relative income because of their high persistence. Convergence to a unimodal income distribution is possible in the long run, however, the households will converge to a value which is far below China’s per capita gross domestic product.
Since a lot of the rural households would congregate to the lower part of the income distribution if the transitional dynamics remain unchanged, therefore, it calls for government intervention.
More resources should be diverted to the rural sector.
The finding also shows that the provinces have very different transitional dynamics even if they are situated in the same economic zone. Thus, the government should formulate province-specific development polices so as to promote greater equality.
Given that no recent research has been conducted on convergence and transitional dynamics of rural household income. Therefore, this paper attempts to fill the gap in the literature by investigating the pattern and future development of rural household income in China through the use of stochastic kernel approach.
The growth of wage inequality during a period of rapid economic development and reform in China raises questions about the nature of economic stratification in contemporary Chinese society. The most prominent explanation is that the transition to a market economy contributed to the growth of wage inequality by increasing the returns to human capital and skill in China. However, recent research suggests that the labor market in China is highly segmented across economic sectors because of preferential state investment and reform of strategic sectors. We contend that the growth and prominence of the financial sector in China empowered financial labor to obtain greater compensation, which created a wage premium in the sector. Drawing on nationally representative data on Chinese urban households, we test this argument by estimating adjusted wage differentials between financial and non-financial sectors across the distribution of earnings since the late 1980s. Estimates show that a wage premium emerged in the mid-1990s for low, median, and high earners in the financial sector. Over the next two decades, wage disparities within the financial sector increased as the wage premium shrank for low earners in the sector while expanding for high earners in the sector. We find that this dynamic is explained by growing occupational stratification in the financial sector, where the wage premium greatly expanded for the highest-paid managers and executives. Overall, this study extends the literature on contemporary economic inequality in China by identifying how excessive compensation among top earners in the financial sector contributed to wage inequality.
This paper analyzes China's rising family income inequality since the early 1990s when the urban labor market started its transformation from a centrally controlled to a market‐driven one. We document the trends in income inequality over the period of 1992–2009 using the Urban Household Survey data, and adopt the approach recently proposed by Eika et al. (2014) to decompose changes in income inequality. We find that labor market factors accounted for about three‐quarters of the overall increases in income inequality while falling marriage rate contributed the other quarter. Changes in human capital levels and marital assortativeness have not contributed to the rising inequality. (JEL D31, I26, J12)
We investigate the evolution of wage levels, wage inequality, and wage determinants among urban residents in China using China Household Income Project data from 1988, 1995, 2002, 2007, and 2013.
Average wage grew impressively between each pair of years. Wage inequality had long been on the increase, but between 2007 and 2013 no clear changes occurred. In 1988, age and wages were positively related throughout working life, but more recently older workers' wages have been lower than those of middle-aged workers. The relationship between education and wages was weak in 1988 but strengthened rapidly thereafter—a process that came to a halt in 2007.
During the period in which China was a planned economy the gender wage gap was small in urban China, but it widened rapidly between 1995 and 2007. We also report the existence of a premium for being employed in a foreign-owned firm or in the state sector.
This study examined the difference between male and female groups’ return on investment (ROI) in education independent of the average gender wage gap. Women’s additional ROI in education was significant and positively estimated. Furthermore, the ROI in women’s education was consistently higher than that in men regardless of educational stage, except for graduate education. These gender differences were greater in the younger generation than in the older generation and have decreased significantly in the recent ten years in high school education. Although the additional ROI in women’s education was positive in the field of culture and arts, education’s effect on wage increases in professional occupations was less than in men, especially in the fields of law and medicine. In addition, we show that gender differences in ROI in education were countercyclical. A base effect, large wage declines for low‐educated women during recessions, could explain this phenomenon. However, coinciding with the existence of positive cash flow news in the stock market that promises good business performance, a significant wage increase among highly educated women was found.
This paper performs a meta-analysis of 1472 estimates extracted from 199 previous studies to investigate the gender wage gap in China. The results show that, although the gender wage gap in China during the transition period has an impact that statistically significant and economically meaningful, it remains at a low level. It is also revealed that the wage gap between men and women is more severe in rural regions and the private sector than those in urban regions and the public sector. Furthermore, we found that, in China, the gender wage gap has been increasing rapidly in recent years.
This paper argues that after a quarter century of sharp and sustained increase, Chinese inequality is now plateauing and, according to some measures, even declining. A number of papers have been harbingers of this conclusion, but this paper consolidates the literature indicating a turnaround, and provides empirical foundations for it. The argument is made using a range of data sources and a range of measures and perspectives on inequality. The evolution of inequality is further examined through decomposition by income source and population subgroup. Some preliminary explanations are provided for these trends in terms of shifts in policy and the structural transformation of the Chinese economy. We relate the turnaround to two classic phenomena in the development economics literature—the Lewis turning point and the Kuznets turning point. The plateauing is not yet a full blown decline, and there are short term variations. But the narrative on Chinese inequality now needs to accommodate the possibility of a turnaround in inequality, and to focus on the reasons for this turnaround.
The present paper analyzes determinants of earnings and the gender earnings gap among highly educated younger workers from nine major cities in Asian countries. We identify skill premiums for both men and women in each city, such as holding a postgraduate degree or degrees in specific fields and experience working or studying abroad. These results show that competition for earnings among highly educated younger workers has been increasing in these cities. Furthermore, the results reveal that, despite being quite narrow, significant gender gaps do exist; the means of log female earnings in each city range between 95.6 and 97.9 percent of those of men. Individuals having natural science degrees or managerial positions possibly affects these small gender gaps in some cities.
Inequality in Mexico rose between 1989 and 1994 and declined between 1994 and 2010. We examine the role of market forces (demand and supply of labour by skill), institutional factors (minimum wages and unionization rate), and public policy (cash transfers) in explaining changes in inequality. We apply the .re-centred influence function. method to decompose changes in hourly wages into characteristics and returns. The main driver is changes in returns. Returns rose (1989-94) due to institutional factors and labour demand. Returns declined (1994-2006) due to changes in supply and, to a lesser extent, in demand; institutional factors were not relevant. Government transfers contributed to the decline in inequality, especially after 2000.
We propose a two-stage procedure to decompose changes or differences in the distribution of wages (or of other variables). In the first stage, distributional changes are divided into a wage structure effect and a composition effect using a reweighting method. The reweighting allows us to estimate directly these two components of the decomposition without having to estimate a structural wage-setting model. In the second stage, the two components are further divided into the contribution of each explanatory variable using novel recentered influence function (RIF) regressions. These regressions estimate directly the impact of the explana-tory variables on the distributional statistic of interest. The paper generalizes the popular Oaxaca-Blinder decomposition method by extending the decomposition to any distributional measure (besides the mean) and by allowing for a much more flexible wage setting model. We illustrate the practical aspects of the procedure by analyzing how polarization of U.S. male wages that took place between the late 1980s and the mid 2000s was affected by factors such as de-unionization, education, occupations and industry changes.
In this article we analyze trends in income inequality and the distribution of income in rural China from 1987 to 1999. We find an uneven but long-run increase in inequality in rural China and show that nearly half of the rural population was not much better off in 1999 than at the start of the period. We rule out geography as the most important factor for explaining income differences and the increases that occurred over time. Much more important were growing differences between households living in the same village, province, or region. We also find that access to nonagricultural incomes from local wage employment and family businesses contributes to inequality but that employment outside the county in which a household lives and accessed through temporary migration is relatively equalizing. Finally, we document important strengths and weaknesses of the primary data set used for our analyses relative to other data sources available for study of inequality and poverty in rural China.
A recent "revisionist" literature characterizes the pronounced rise in U.S. wage inequality since 1980 as an "episodic" event of the first half of the 1980s driven by nonmarket factors (particularly a falling real minimum wage) and concludes that continued increases in wage inequality since the late 1980s substantially reflect the mechanical confounding effects of changes in labor force composition. Analyzing data from the Current Population Survey for 1963 to 2005, we find limited support for these claims. The slowing of the growth of overall wage inequality in the 1990s hides a divergence in the paths of upper-tail (90/50) inequality-which has increased steadily since 1980, even adjusting for changes in labor force composition-and lower-tail (50/10) inequality, which rose sharply in the first half of the 1980s and plateaued or contracted thereafter. Fluctuations in the real minimum wage are not a plausible explanation for these trends since the bulk of inequality growth occurs above the median of the wage distribution. Models emphasizing rapid secular growth in the relative demand for skills-attributable to skill-biased technical change-and a sharp deceleration in the relative supply of college workers in the 1980s do an excellent job of capturing the evolution of the college/high school wage premium over four decades. But these models also imply a puzzling deceleration in relative demand growth for college workers in the early 1990s, also visible in a recent "polarization" of skill demands in which employment has expanded in high-wage and low-wage work at the expense of middle-wage jobs. These patterns are potentially reconciled by a modified version of the skill-biased technical change hypothesis that emphasizes the role of information technology in complementing abstract (high-education) tasks and substituting for routine (middle-education) tasks. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
We propose a new regression method to estimate the impact of explanatory variables on quantiles of the unconditional (marginal) distribution of an outcome variable. The proposed method consists of running a regression of the (recentered) influence function (RIF) of the unconditional quantile on the explanatory variables. The influence function is a widely used tool in robust estimation that can easily be computed for each quantile of interest. We show how standard partial effects, as well as policy effects, can be estimated using our regression approach. We propose three different regression estimators based on a standard OLS regression (RIF-OLS), a logit regression (RIF-Logit), and a nonparametric logit regression (RIF-OLS). We also discuss how our approach can be generalized to other distributional statistics besides quantiles.
This paper provides evidence that the decline in the real value of the minimum wage and in the rate of unionization account for a significant share of the increase in wage inequality in the United States between 1979 and 1988. The role of the minimum wage is particularly important for women, while deunionization has the largest impact on men. The authors develop a semiparametric procedure that applies kernel density methods to appropriately weighted samples. The procedure provides a visually clear representation of where in the density of wages institutional and labor market forces exert the greatest impact. Copyright 1996 by The Econometric Society.
We examine inequality decompositions by income source and describe a general, regression-based approach for decomposing inequality. The approach provides an efficient and flexible way to quantify the roles of variables like education and age in a multivariate context. We illustrate the method using survey data from China. The empirical results demonstrate how sharply different conclusions can emerge for different decomposition rules. We explain how these differences reflect the treatment of equally-distributed sources of income, and we discuss implications for how results from inequality decomposition are interpreted. Copyright Royal Economic Society 2002
A considerable literature exists on the measurement of income inequality in China and its increasing trend. Much less is known about the driving forces of this trend and their quantitative contributions. Conventional decompositions, by factor components or by population subgroups, provide only limited information on the determinants of income inequality. This paper represents an early attempt to apply the regression-based decomposition framework to the study of inequality accounting in rural China, using household-level data. It is found that geography has been the dominant factor but is becoming less important in explaining total inequality. Capital input emerges as a most significant determinant of income inequality. Farming structure is more important than labor and other inputs in contributing to income inequality across households. Copyright United Nations University 2005.
Using two large samples for 1988 and 1995 we decompose the Gini coefficient of household income according to type of income with the purpose of analyzing reasons for the rapid increase of inequality. The results show that the change in relative size of money income and its changed profile are found to be the major processes behind the rapid increase of income inequality in rural China. Changes in housing allocation and an increased number of retirees in combination with higher benefits have made inequality increase in urban China and in China as a whole.JEL classification: D31, P27.
Abstract Two strictly comparable cross-section household datasets, relating to 1988 and 1995, are used to analyse the increase in wage inequality from an initially low level in urban China over this period of labour market reform. The institutional background and the evolution of policy are described. The rapid growth of wage inequality and the sharp widening of wage structure are quantified. Earnings functions are compared, and the increase in both the level and the inequality of wages are decomposed into their constituent elements. Quantile regression analysis is conducted to throw light on the relationships between the observed and the unobserved determinants of wages. Distinctions are made between the variables likely to represent human capital, discrimination, and segmentation. The evidence suggests that productive characteristics were increasingly rewarded as marketization occurred, but that discrimination and segmentation also grew. The move towards a fully-fledged labour market was by no means complete. JEL classifications: J31, J41, J42, J71, D31, D63.
Regressions explaining the wage rates of white males, black males, and white females are used to analyze the white-black wage differential among men and the male-female wage differential among whites. A distinction is drawn between reduced form and structural wage equations, and both are estimated. They are shown to have very different implications for analyzing the white-black and male-female wage differentials. When the two sets of estimates are synthesized, they jointly imply that 70 percent of the overall race differential and 100 percent of the overall sex differential are ultimately attributable to discrimination of various sorts.
This paper analyzes the impact of market liberalization on gender earnings differentials and discrimination against women in urban China at the beginning of the 1990s. The observed stability in the overall gender earnings gap between 1988 and 1995 is shown to result from a complex set of evolutions across enterprises, earnings distributions, and time. Our results highlight the interplay of opposing forces, with economic reforms contributing to changes in managers’ behaviors in different dimensions. On the one hand, by bringing more competition, liberalization favored a reduction in discriminating behaviors in both urban collectives and foreign-invested enterprises; on the other hand, by relaxing institutional rules, it led to a loosening of the government's egalitarian wage-setting policies, leaving more space for discrimination in state-owned enterprises.
Using 1987, 1996, and 2004 data, we show that the gender earnings differential in the Chinese urban labor market has increased across the earnings distribution, and the increase was greater at the lower quantiles. We interpret this as evidence of the stronger “sticky floor” effect. We use the reweighting and recentered influence function regression methods proposed by Firpo, Fortin, Lemieux to decompose gender earnings differentials across the earnings distribution [Firpo, S., Fortin, N.M., Lemieux, T., 2007a. Unconditional quantile regressions. Technical working paper No. 339, NBER; Firpo, S., Fortin, N.M., Lemieux, T., 2007b. Decomposing wage distributions using influence function projections. Working paper. Department of Economics, University of British Columbia]. We find that gender differences in the return to labor market characteristics, also known as the “discrimination effect” or “unexplained gender pay gap,” contribute more to the increase in the overall gender earnings differential than do the gender endowment differences. The Firpo et al. method allows us to further decompose the gender earnings gap into the contribution of each individual variable. We find that the “sticky floor” effect may be associated with a particularly low paid group of female production workers with relatively low education working in non-state owned enterprises. Journal of Comparative Economics36 (2) (2008) 243–263.
This paper proposes a framework for inequality decomposition in which inequality of the target variable, e.g., income, can be decomposed into components associated with any number of determinants or proxy variables in a regression equation. The proposed framework is general enough to be applied to any inequality measure and it imposes few restrictions on the specification of the regression model. This generality is illustrated by quantifying root sources of regional income inequality in rural China using a combined Box–Cox and Box–Tidwell income-generating function. Journal of Comparative Economics32 (2) (2004) 348–363.
This paper proposes a semiparametric estimator of distribution functions in the presence of covariates. The method is based on the estimation of the conditional distribution by quantile regression. The conditional distribution is then integrated over the range of covariates. Counterfactual distributions can be estimated, allowing the decomposition of changes in distribution into three factors: coefficients, covariates and residuals. Sources of changes in wage inequality in the USA between 1973 and 1989 are examined. Unlike most of the literature, we find that residuals account for only 20% of the explosion of inequality in the 80s.
A labor market is beginning to emerge in urban China during a period of rapid growth and changed labor supply. In this paper, we investigate how earnings inequality and relative earnings have changed between 1988 and 1995 using two large samples covering 10 provinces. The results verify that, as expected, earnings inequality has increased rapidly. The expansion can be traced to two components, the basic wage and subsidies. The analysis shows that the growth in earnings inequality is not limited to certain segments of the labor force but affects all categories as defined by ownership sector, region, and education. J. Comp. Econ., March 2001 29(1), pp. 118–135. Department of Social Work, University of Göteborg, P.O. Box 720, SE 405 30 Göteborg, Sweden; and Institute for the Study of Labor (IZA), Bonn, Germany; and Institute of Economics, Chinese Academy of Social Sciences, 2 Yuetan Beixiaojie, Beijing, People's Republic of China. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: J31, O18, O53, P23.
The gender wage gap and its development in urban China is analysed utilising two large scale surveys covering 10 provinces for the years 1988 and 1995. The results indicate that from an international perspective, the gender wage gap in urban China appears to be relatively small. It is, however, increasing. Decompositions based on estimated regression-models show that somewhat less than half of the average gender wage gap can be attributed to differences in variables but much less of its increase. The earnings situation of young women and women with limited education has especially deteriorated if compared to men having the same characteristics.
Considerable effort has been exercised in estimating mean returns to education while carefully considering biases arising from unmeasured ability and measurement error. Recent work has investigated whether there are variations from the "mean" return to education across the population with mixed results. We use an instrumental variables estimator for quantile regression on a sample of twins to estimate an entire family of returns to education at different quantiles of the conditional distribution of wages while addressing simultaneity and measurement error biases. We test whether there is individual heterogeneity in returns to education and find that: more able individuals obtain more schooling perhaps due to lower marginal costs and/or higher marginal benefits of schooling and that higher ability individuals (those further to the right in the conditional distribution of wages) have higher returns to schooling consistent with a non-trivial interaction between schooling and unobserved abilities in the generation of earnings. The estimated returns are never lower than 9 percent and can be as high as 13 percent at the top of the conditional distribution of wages but they vary significantly only along the lower to middle quantiles. Our findings may have meaningful implications for the design of educational policies.
In urban China the Household Income and Expenditure Survey requires respondents to keep a daily expenditure diary for a full 12-month period. This onerous reporting task makes it difficult to recruit households into the survey, compromising the representative nature of the sample. In this article we use data on the monthly expenditures of households from two urban areas of China to see if data collection short-cuts, such as extrapolating to annual totals from expenditure reports in only some months of the year, would harm the accuracy of annual expenditure, inequality and poverty estimates. Our results show that replacing 12-month diaries with simple extrapolations from either one, two, four or six months would cause a sharp increase in estimates of annual inequality and poverty. This finding also undermines international comparisons of inequality statistics because no country other than China uses such comprehensive 12-month expenditure records. But a corrected form of extrapolation, based on correlations between the same household’s expenditures in different months of the year, gives much smaller errors in estimates of inequality and poverty.
We introduce a new, integrated regression-based approach for decomposing inequality indices with household-level data, and we examine the strengths and weaknesses of inequality decompositions by income source in light of the way that they are commonly interpreted. The approach uses estimated income flows from variables in linear income equations to decompose aggregate inequality indices. The integrated approach provides an efficient and flexible way to quantify the roles of variables like education education, age, infrastructure, and social status in a multivariate context.
A national urban household survey for China in 1986 is analyzed to examine the determinants and the extent of income inequality. The influence of age, education, occupation, ownership category, sex, region, and their various inter-relationships are studied. Estimates of income inequality among household heads are also made. By presenting a blend of institutional and statistical analysis, the emphasis throughout is placed on explanation. By international standard, the urban wage structure in China is extremely compressed. This reflects the egalitarian objectives and interventionist instruments of government. Yet in some of the results the Chinese employment system is found to mimic a labor market. Policy implications are drawn. Copyright 1991 by Blackwell Publishing Ltd
In this paper, we examine the determinants of urban wages in China from 1988 to 2002. We find increased returns to education but a decrease in the returns to experience. The 2002 data imply that the widening pure gender gap and the growth in the premium to Communist Party membership may have come to an end. The reform of the state-owned enterprise (SOE) sector and the shift in industrial structure out of heavy industry is shown to impact wages of workers within those sectors. We use recall panel data for 1998 to 2002 to provide fixed effects estimates of the impact of sector ownership, Communist Party membership and unemployment on wages. Journal of Comparative Economics33 (4) (2005) 644–663.
In urban China the Household Income and Expenditure Survey requires respondents to keep a daily expenditure diary for a full 12-month period. This onerous reporting task makes it difficult to recruit households into the survey, compromising the representative nature of the sample. In this article we use data on the monthly expenditures of households from two urban areas of China to see if data collection short-cuts, such as extrapolating to annual totals from expenditure reports in only some months of the year, would harm the accuracy of annual expenditure, inequality and poverty estimates. Our results show that replacing 12-month diaries with simple extrapolations from either one, two, four or six months would cause a sharp increase in estimates of annual inequality and poverty. This finding also undermines international comparisons of inequality statistics because no country other than China uses such comprehensive 12-month expenditure records. But a corrected form of extrapolation, based on correlations between the same household's expenditures in different months of the year, gives much smaller errors in estimates of inequality and poverty.
We construct a tractable, flexible-functional-form estimator of cumulative distribution functions for non-negative random
variables which admits large numbers of covariates. The estimator adopts and extends techniques from the spell-duration literature
for estimating hazard functions to distribution functions for wages, earnings, and income. We apply these methods to investigate
sources of wage inequality for full-time male workers between Canada and the United States, finding that the Canadian wage
density has a thinner left tail because low-educated workers have higher pay and a thinner right tail because of a lower proportion
of highly-educated workers. Unions appear to play a large role in these outcomes.
Over the last fifteen years, many researchers have attempted to explain the determinants and changes of wage inequality. I propose a simple procedure to decompose changes in the distribution of wages or in other distributions into three factors: changes in regression coefficients; the distribution of covariates, and residuals. The procedure requires only estimating standard OLS regressions augmented by a logit or probit model. It can be extended by modelling residuals as a function of unmeasured skills and skill prices. Two empirical examples showing how the procedure works in practice are considered. In the first example, sources of differences in the wage distribution in Alberta and British Columbia are considered; in the second, sources of change in overall wage inequality in the United States, 1973–99, are re–examined. Finally, the proposed procedure is compared with existing procedures. JEL classification: J3
La décomposition des changements dans les distributions de salaires : une approche unifée. Au cours des quinze dernières années, nombre d’études se sont penchées sur les déterminants et les changements de la distribution des salaires. Ce mémoire propose une procédure pour décomposer les changements de la distribution des salaires en trois éléments: les changements dans les coefficients de régression, la distribution des regresseurs et les changements résiduels. Cette procédure ne nécessite que l’estimation de regressions par moindre carrés ordinaires et d’un modèle probit ou logit. L’auteur montre aussi comment modéliser les résidus en fonction de compétences non mesurées. La procédure proposée est mise en application dans le contexte de deux exemples: la distribution des salaires en Alberta et en Colombie–Britannique et les changements dans la distribution des salaires de 1973 à 1999 aux Etats–Unis. Le mémoire examine aussi comment cette procédure se compare aux méthodes proposées par d’autres chercheurs.
Economic transition from a planned to a market oriented economy is often associated with a widening of income inequality. The nature of this change, however, may differ during different stages of the economic transition. This paper investigates the increase in income inequality in urban China during two phases of economic reform: a moderate reform era (1988-95) and a radical reform era (1995-99). It is found that although income inequality increased considerably during both stages, the nature and causes of the increase are different. In the moderate reform period, the increase in inequality was a result of some parts of society sharing more of the economic gain than others, and the main cause of this inequality is regional income dispersion. During the radical reform period income reductions at the lower end of the distribution is observed, and it is mainly due to the large-scale unemployment generated by labor reallocation. Copyright 2004 Blackwell Publishing Ltd.
The effect of transition on the distribution of income in China
Gustafsson, B., & Li, S. (2001a). The effect of transition on the distribution of income in China. Economics of Transition, 9(3), 593–617.
China considers cap on salaries at state monopolies. China Daily Available online at http://www.chinadaily.com Glass ceiling or sticky floor? Examining the gender earnings differential across the earnings distribution in urban China
China Daily Chi
China Daily (2010). China considers cap on salaries at state monopolies. China Daily, June 30. Available online at http://www.chinadaily.com.cn/china/2010-06/30/content_10037055.htm Chi, W., & Li, B. (2008). Glass ceiling or sticky floor? Examining the gender earnings differential across the earnings distribution in urban China, 1987–2004. Journal of Comparative Economics, 36, 243–264.
Rising wage inequality: The role of composition and prices. NBER working paper No.11628 Trends in U.S. wage inequality: Revising the revisionists
D H Autor
L F Katz
M S Kearney
Autor, D. H., Katz, L. F., & Kearney, M. S. (2005). Rising wage inequality: The role of composition and prices. NBER working paper No.11628. Autor, D. H., Katz, L. F., & Kearney, M. S. (2008). Trends in U.S. wage inequality: Revising the revisionists. The Review of Economics and Statistics, 90(2), 300–323.