International financial crisis and wage inequality in urban China

Abstract

The shock of the 2007/2008 international financial crisis had a negative impact on the Chinese economy at its early stage, but the immediate reaction of the Chinese government with a stimulus package of 4 trillion yuan has recovered this economy soon. Since the crisis and the governmental stimulus package have generated different impacts on unemployment and wage growth across regions and industries, it will lead to some changes in the pattern of wage inequality. This paper uses urban household data collected from RUMiC surveys during 2008–2010 to investigate changes in wage growth and inequality in urban China in this period. The findings indicate that the international financial crisis did not have significantly negative impact on wage growth and contributed to narrowing wage inequality in urban China, which was largely due to offsetting effects of the governmental stimulus policies. However, as the impact of the stimulus policies faded and the impact of the international financial crisis worsened, the wage growth experienced a downward trend and wage inequality rose in 2010.