Education Development and Wage Inequality in Urban China

CITATION
Li, S., Wu, S. & Xing, C. (2018) Education Development and Wage Inequality in Urban China, Asian Economic Panel and the Massachusetts Institute of Technology, 17(2)

Abstract
Using a representative household survey for 1995, 2002, 2007, and 2013, we show that education plays
a pivotal role in shaping wage inequality in urban China. We find that education was a major contributor
to increased wage inequality between 1995 and 2013. The returns to education remained high after
2007 despite a large inflow of college-educated workers. Although regional wage inequality declined
from 2007–13, regional wage inequality among educated workers did not. Residual wage inequality
increased, and the within inequality of educated workers increased faster than that of the less educated.
We argue that China’s education expansion seems insufficient to narrow the educational wage
gap, and a lack of labor mobility for educated workers prevents the decline in returns to education in
specific regions.


Researching on a similar topic? Get research help: anyangoceline19@gmail.com


REFERENCES 
Black, Dan, Natalia Kolesnikova, and Lowell Taylor. 2009. Earnings Functions When Wages and
Prices Vary by Location. Journal of Labor Economics 27(1):21–47.

Chen, Yuyu, ZhigangWang, and Zhong Wei. 2004. Earnings Inequality and its Evolution in the 1990s
in Urban China [in Chinese]. Economic Science (JingjiKexue) 2004(4):16–25.

Fan, Wen, Yuanyuan Ma, and LimingWang. 2015. Do We Need More Public Investment in Higher
Education? Estimating the External Returns to Higher Education in China. Asian Economic Papers
14(3):88–104.

Kim, Dae-Il, and Robert Topel. 1992. Labor Markets and Economic Growth: Lessons from Korea’s
Industrialization, 1970–1990. In: Differences and Changes in Wage Structures, edited by R. B. Freeman

and L. F. Katz, pp. 227–264. Chicago: University of Chicago Press.
Li, Shi, and Terry Sicular. 2014. The Distribution of Household Income in China: Inequality, Poverty
and Policies. The China Quarterly 217:1–41.

Li, Shi, ShanshanWu, and Chunbing Xing. 2016. Wage Growth,Wage Inequality, and Structural
Change. CIID Working Paper No. 51. Beijing: China Institute of Income Distribution.
Luo, Dongdong, and Chunbing Xing. 2016. Population Adjustments in Response to Local Demand
Shifts in China. Journal of Housing Economics 33(2016):101–114.

Meng, Xin, Kailing Shen, and Sen Xue. 2013. Economic Reform, Education Expansion, and Earnings
Inequality for Urban Males in China, 1988–2009. Journal of Comparative Economics 41(1):227–244.
Morduch, Jonathan, and Terry Sicular, 2002. Rethinking Inequality Decomposition, with Evidence
from Rural China. The Economic Journal 112(476):93–106.

Schott, Peter. 2008. The Relative Sophistication of Chinese Exports. Economic Policy 23(53):6–49.
Whalley, John, and Chunbing Xing. 2014. The Regional Distribution of Skill Premia in Urban China:
Implications for Growth and Inequality. International Labour Review 153(3):395–419.

Xing, Chunbing, and Shi Li. 2012. Residual Wage Inequality in Urban China, 1995–2007. China Economic
Review 23(2):205–222.

Xing, Yuqing. 2014. China’s High-Tech Exports: The Myth and Reality. Asian Economic Papers
13(1):109–123.