The Effects of the State Sector on Wage Inequality in Urban China: 1988–2007

34 Pages Posted: 26 Jan 2013

See all articles by Qingjie Xia

Qingjie Xia

Peking University

Lina Song

Nottingham University Business School

Li Shi

Chinese Academy of Social Sciences (CASS) - Institute of Economics; IZA Institute of Labor Economics

Simon Appleton

University of Nottingham - School of Economics

Abstract

This paper examines the effects of state sector domination on wage inequality in urban China. Using Chinese Household Income Project surveys, we conduct two exercises: with quantile regression analysis, we identify wage gaps across the distribution and over time; and we employ the Machado and Mata (2005) decomposition to investigate how urban wage inequality was affected by the changes in wage structure and employment share of the state sector. We find that since the radical state sector reforms designed to reduce over-staffing and improve efficiency since the late 1990s, urban wage gaps were narrowed due to the reduction of employment share in the state sector; the wage premium of the state sector in comparison with the non-state sector increased significantly; and changes in the wage structure of the labour market caused the rise in urban wage inequality.

Keywords: China, state sector, wage inequality, quantile regression, counterfactual analysis

JEL Classification: J31, J42, O15, P23

Suggested Citation

Xia, Qingjie and Song, Lina and Shi, Li and Appleton, Simon, The Effects of the State Sector on Wage Inequality in Urban China: 1988–2007. IZA Discussion Paper No. 7142, Available at SSRN: https://ssrn.com/abstract=2207283

Qingjie Xia (Contact Author)

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Lina Song

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road,
Nottingham, NG8 1BB
United Kingdom
0115 8466217 (Phone)

Li Shi

Chinese Academy of Social Sciences (CASS) - Institute of Economics ( email )

2 Yuetan Beixiaojie
Beijing
+86 1 068032473 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Simon Appleton

University of Nottingham - School of Economics ( email )

University Park
Nottingham NG7 2RD
United Kingdom

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