Abstract
Using data from the 2010 China Family Panel Study and county- and industry-level statistics, we estimate cross-classified multilevel models to examine the determinants of the income gap among Chinese workers. Results show that both regional and industrial differences are important sources of income inequality in China. Taken together, they account for about one fifth of the total variation in individual income. Among them, differences in county explains 7%, while difference in industry accounts for 14% of the total variation. Further analyses demonstrate that county- and industry-level variables have significant independent effects on individual income even after controlling for individual socio-demographic characteristics and human capital resources. We also explore the potential mechanisms through which macro-level factors function in widening income gaps among Chinese workers. Our results show industrial monopolies have been a key driver of the elevated income inequality in China.
Highlights
China witnessed rapid economic growth and great alleviation of poverty since its economic reform
There is a growing body of literature that focuses on the rising income inequality in China that has occurred during the reform era, which suggests that China has been transformed from a relatively egalitarian society into a society with significant income gaps over the past several decades
Results show that about 7% of the total variation in individual income is explained by regional variation, 7 another 14% of the total variation is explained by inter-industry difference,8 and taken together, more than one fifth (21%) of observed income inequality is due to differences in region or industry
Summary
China witnessed rapid economic growth and great alleviation of poverty since its economic reform. This study fills the gap in the literature in three important aspects: First, given the institutional reality of “departmental and regional segregation (tiao kuai fenge)” in the Chinese governance system, we simultaneously consider industry and regional factors, creating a cross-classified framework of labor markets. This enables us to disentangle the independent effects of different contextual factors affecting income inequality. By focusing on a smaller and relatively homogeneous regional unit, it is likely that we can better capture regional variations and more precisely estimate the effect of regional barriers on individual income
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
