Abstract
Using a recently constructed dataset that draws on the China Employer–Employee Survey, this paper provides new evidence on the earnings gap between rural migrant and urban manufacturing workers in the People's Republic of China. When we only control for province fixed effects, we find that rural migrant workers are paid 22.3% less per month and 32.2% less per hour than urban workers. We find that the gap in hourly earnings is larger than the gap in monthly earnings because rural migrant workers tend to work an average of 5.6% more hours per month than urban workers. Using these data, we also find that 87.4% of the monthly earnings gap and 73.9% of the hourly earnings gap can be attributed to differences in the individual characteristics and human capital levels of rural migrant and urban workers. Furthermore, we find that this unexplained earnings gap varies among different groups of workers. The earnings gap is much larger (i) for workers in state-owned enterprises than in nonstate-owned enterprises, (ii) for college-educated workers than workers with lower levels of educational attainment, and (iii) in Guangdong province than in Hubei province.
Highlights
The large-scale movement of rural migrant workers from the lowproductivity agriculture sector to higher-productivity sectors has been an important force behind the development of the economy of the People’s Republic of China (PRC) (Li et al 2017)
We use a recent dataset derived from the CEES to examine the earnings gap between rural migrant and urban workers, and to determine how much of this gap can be explained by differences in the individual characteristics and human capital levels of sample workers
When we control for province fixed effects only, we find that rural migrant workers are paid 22.3% less per month and 32.2% less per hour than urban workers
Summary
The large-scale movement of rural migrant workers from the lowproductivity agriculture sector to higher-productivity sectors has been an important force behind the development of the economy of the People’s Republic of China (PRC) (Li et al 2017). We will use a new dataset, the China Employer–Employee Survey (CEES), to reexamine whether there is an earnings gap between rural migrant and urban workers in the PRC, and to determine how much of the gap can be explained by the individual characteristics and human capital levels of workers. An alternative theory argues that the spatial distribution of labor may already be efficient and that such gaps could reflect differences in human capital and unobserved skills (Young 2013; Lagakos and Waugh 2013; Hicks et al 2017; Herrendorf and Schoellman 2018; Lagakos, Mobarak, and Waugh 2018) This line of thought argues that workers are geographically sorted into urban and rural areas based on their human capital and skills in response to the regional demand for skills.
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