The Effects of the Minimum Wage on Earnings Inequality: Evidence from China

Carl Lin and Myeong-Su Yun ()

No 9715, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The minimum wage has been regarded as an important element of public policy for reducing poverty and inequality. Increasing the minimum wage is supposed to raise earnings for millions of low-wage workers and therefore lower earnings inequality. However, there is no consensus in the existing literature from industrialized countries regarding whether increasing the minimum wage has helped lower earnings inequality. China has recently exhibited rapid economic growth and widening earnings inequality. Since China promulgated new minimum wage regulations in 2004, the magnitude and frequency of changes in the minimum wage have been substantial, both over time and across jurisdictions. The growing importance of research on the relationship between the minimum wage and earnings inequality and its controversial nature have sparked heated debate in China, highlighting the importance of rigorous research to inform evidence-based policy making. We investigate the contribution of the minimum wage to the well-documented rise in earnings inequality in China over the period from 2004 to 2009 by using city-level minimum wage panel data and a representative Chinese household survey, and we find that increasing the minimum wage reduces inequality – by decreasing the earnings gap between the median and the bottom decile – over the analysis period.

Keywords: China; earnings inequality; minimum wage (search for similar items in EconPapers)
JEL-codes: J31 J38 O15 R23 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2016-02
New Economics Papers: this item is included in nep-cna, nep-lma and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published - published in: Research in Labor Economics (Income Inequality Around the World), 2016, 44, 179-212

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Chapter: The Effects of the Minimum Wage on Earnings Inequality: Evidence from China (2016)
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