What is the Role of Discrimination in Ethnic Minority Salary Determination? Evidence from China

Abstract

The literature on ethnic minority development in China has a significant puzzle: in some studies, urban minorities perceive lower wages relative to the majority Han, while in other studies there is little to no evidence of this wage gap. There does not exist a clear theoretical expectation as to how these findings could simultaneously be true suggesting that new theory-building is necessary. We propose that the primary issue, and a potential solution to this riddle, is the failure to fully disaggregate ethnic minority groups’ labour market experiences. We thus leverage a new, large dataset solely looking at ethnic minorities in China to explore this divergence. We find outsider minorities – which includes Tibetans and Islamic-oriented groups such as the Uyghurs and Kazak – have a 20-25 percent wage penalty controlling for covariates, while minorities in aggregate do not appear to have a significant wage gap. These findings are robust across several different specifications, and have notable implications for ethnic minority development and public policies in China.