Regional variation in earnings inequality in reform-era urban China

Abstract

This article studies the regional variation in earnings inequality in contemporary urban China, focusing on the relationship between the pace of economic reforms and earnings determination. Through a multilevel analysis, it shows that economic growth depresses the returns to education and work experience and does not affect the net differences between party members and non-members and between men and women. Overall earnings inequality remains low and only slightly correlated with economic growth because, in faster-growing cities, the tendency toward higher levels of inequality is somewhat offset by the lower returns to human capital. A plausible interpretation is that these results are largely due to the lack of a true labor market in urban China.