City Size and Wage Disparity in Segmented Labour Market in China

Liqun Pan, Pundarik Mukhopadhaya and Jing Li

Australian Economic Papers, 2016, vol. 55, issue 2, 128-148

Abstract: type="main">

The relation between city size and wage inequality is well established for Western countries. This paper finds that city size–wage premium exists across Chinese cities to a lower extent than the Western world. Further, using a simplified model on the Chinese Household Income Project survey data, we find that the city size–wage premium varies with difference in skills among urban citizens. The variation amounts to 50% more for the high-skill workers compared with their low-skill counterparts. Moreover, owing to the presence of segmented labour market, the patterns of city size–wage premium and city size–wage inequality premium are notably different for the migrants, who receive a much lesser wage than the citizens and do not experience wage variation owing to their skill heterogeneity.

Date: 2016
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