Market expansion, state intervention and wage differentials between economic sectors in urban China: A multilevel analysis

Ye Liu, Wei Xu, Jianfa Shen and Guixin Wang
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Ye Liu: The Chinese University of Hong Kong, Hong Kong; University of St Andrews, UK
Wei Xu: University of Lethbridge, Canada; The Center for Modern Chinese Studies, East China Normal Universality, China
Jianfa Shen: The Chinese University of Hong Kong, Hong Kong
Guixin Wang: Fudan University, China

Urban Studies, 2017, vol. 54, issue 11, 2631-2651

Abstract: The rising earnings inequality in China has sparked a heated debate on the socioeconomic outcomes of market transformation. While a large body of literature has focussed on the temporal trend of wage inequality during the reform period, much less attention has been devoted to the structural causes of regional variations in sectoral wage differentials. Using a micro-data sample from the 2005 one percent population sample survey and multilevel methods, this article examines the geographic variability of wage differentials between economic sectors in urban China, with a particular focus on the combination effects of market expansion and state intervention. The results indicate that sectoral wage differentials vary substantially across regions, and that market expansion interacts with state intervention to reconfigure earnings outcomes. Specifically, prefectures located in the interior region tend to exhibit a large wage premium for the state sectors, while prefectures located in the coastal region tend to display a wage advantage of the foreign-invested sector. The wage gap between the state and non-state sectors is smaller in areas with diversified ownership; openness to foreign investment increases the relative wages of foreign-invested-sector employees; stringent government regulation of industries increases the wage gap between the state monopoly sector and the non-monopoly sector; and strong redistributive power increases the wage premium for the public service sector over other sectors. Our findings suggest the necessity to take into account contextually constituted and locally specific wage-setting mechanisms when studying China’s wage inequality.

Keywords: China; labour market; market transformation; multilevel modelling; wage inequality; 中国; 劳动力市场; 社会转型; 多层建模; å·¥èµ„ä¸ å¹³ç­‰ (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:sae:urbstu:v:54:y:2017:i:11:p:2631-2651

DOI: 10.1177/0042098016650421

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