The regional distribution of skill premia in urban China: Implications for growth and inequality

Abstract

Based on urban household survey data, the authors find that skill premia increased significantly across all regions of China between 1995 and 2002, but only in coastal regions between 2002 and 2007. By then, these regions also displayed much wider wage inequality and thus contributed more to overall urban wage inequality than non-coastal regions. While privatization was the main driver of skill premia in 1995-2002, China's (regionally uneven) integration into the global economy became the dominant influence in 2002-07. Reducing skill premia and inequality, the authors argue, calls for reform of the Hukou registration system which impedes skilled labour mobility and possibly also growth.