The changing texture of the city-size wage differential in Chinese cities – Effects of skill and identity

Abstract

This study examines the city-size wage premium (CSWP) for local urban hukou holders (citizens) and rural migrants by utilizing data from the Chinese Household Income Project surveys (CHIP 2002 and 2013) employing OLS and Propensity Score Matching method. Heterogeneity of skills (measured by level of education) is found to be one determinant of the city-size wage disparity. But irrespective of skills, citizens receive a higher city-size premium than the rural migrants; nevertheless, the premium received by rural migrants has increased over the past few years. Within the similar occupation and type of firm, a highly skilled citizen received a CSWP of Yuan 880.08 in 2013 (Yuan 347.48 in 2002) on average per month. Whereas, a highly skilled rural migrant received an average monthly premium of Yuan 601.71 in 2013, and an insignificant premium in 2002. The corresponding values for low skilled citizens and rural migrants in 2013 are Yuan 415.67 and 267.27 respectively. Our results establish that there has been a positive effect on rural migrants from the relaxation of policies and labour laws, and a move towards equalization within the same level of skills.