Urban Wage Inequality Research Articles

State capacity, tax evasion, and wage inequality

AbstractThis paper explores how state capacity in the sense of controlling tax evasion affects wage inequality through constructing several general equilibrium models. We analyse six types of redistribution in urban areas, and find that effect variations in urban wage inequality arise depending on the specific recipients of redistribution. Notably, under redistribution to urban unskilled labour, changes in wage inequality will depend on the capital intensity of the urban skilled sector when state capacity increases.

Distributional Effects of Trade Liberalisation on Wages in India

There is a high level of policy interest on the effect of trade liberalisation on inequality, especially in developing countries, because of their large vulnerable populations. India also initiated the process of liberalisation as a response to the severe balance of payments crisis of 1991. However, both rural and urban inequality has been increasing since the period 1993–1994, with urban inequality increasing at a higher rate. This study empirically examines the impact of trade openness on wage inequality using panel data for Indian states (separately for rural and urban areas). The results of this study indicate that trade openness does not lead to decrease in the wage inequality in the states and their rural areas. However, urban wage inequality is found to be increasing due to trade openness. These results are analysed and explained by various factors present in the Indian economy such as, skill biased technological changes; trade in intermediate goods; barriers to domestic labour mobility; and pattern and composition of India’s exports. An interesting aspect emerging is that higher education levels lead to increase in wage inequality as returns to education and inequality are increasing and the increase is also attributed to liberalisation. JEL Codes: F16, O18, C23

Urban wage inequality: the reform of state-owned enterprises in China’s great transition

Along with the further reforms of state-owned enterprises (SOEs), urban China has experienced an evident increase in wage inequality. Using provincial-level data for the period 1993–2013 and individual-level data from five waves of the China Household Income Project from 1988 to 2013, this paper investigates how the SOE reform affects wage distribution in urban China by considering three mechanisms: wage determination, ownership structure and institutional segmentation. The results of this study show that overall inequality increased with the reduction of SOEs’ share in the economy. Moreover, through a detailed Oaxaca–Blinder re-centred influence function decomposition, this experiment obtains consistent and robust results. Based on the theory of soft budget constraint, this study demonstrates that the increase in urban wage inequality has been mainly caused by wage structure effects. Since the SOE reform in the 1980s, the wage determination mechanism has changed with the increase in the return of the labour force to education. During this period, institutional segmentation was of less significance in explaining the wage gap between SOEs and non-SOEs. Furthermore, the accelerating ageing process of China’s population had no significant effects on the trajectory of urban wage inequality throughout this period.

Post-industrial Economic Restructuring and Wage Inequality in Urban China, 2003–2015: A Sectoral Perspective

Income inequality in urban China has attracted growing attention from China’s urban researchers and policy makers. Whereas many studies have interrogated the pattern and process of the income gap in Chinese cities undergoing the institutional transformation from plan to market, relatively little is known about how such unequal distribution of income is related to China’s ongoing structural transformation toward a post-industrial economy. Drawing on a decomposition methodology based on the Theil index, this study aimed to address this lacuna through an empirical investigation of China’s urban wage inequality from a sectoral perspective. Our empirical study identified the low-wage manufacturing sector and the high-wage producer services sector as the two biggest contributors to urban wage inequality in China. Urban wage inequality within the producer services was found to be caused by the spatial concentration of a disproportionate number of high-paying jobs in a few developed, high-tier city-regions on the eastern coast. Our empirical findings have important implications for the formulation of policies to address the income inequality that plagues China’s continuing urbanization.

Minimum Wage Impacts on the Wage Distribution and Inequality in China

This paper examines the distributional impacts of the minimum wage on the urban wages of Han-minority workers and the implications for urban inequality. County-level minimum wage data is combined with recent proprietary household survey data representative of China’s ethnically diverse areas. The identification strategy relies on an unconditional quantile regression framework that takes into account policy endogeneity using an instrument variable approach. The findings show that minimum wages lead to wage compression along the bottom and middle parts of the urban wage distribution. The minimum wage effects are larger for lower-skilled workers located in ethnic minority counties or that belong to an ethnic minority group. Counterfactual analysis further shows that minimum wages help to significantly reduce aggregate urban wage inequality: increasing minimum wages from a counterfactual benchmark to their observed levels, an average increase of 26%, reduces the Gini coefficient of wages by 10-12%.

Global city development and urban wage inequality in China

ABSTRACT This study stress-tests the hypothesized relationship between global city status and the level of urban inequality in the context of China’s globalizing cities. Based on a multi-level modelling analysis of the wage effect of Chinese cities’ global connectivity, this study identifies a “global connectivity wage premium” for professional occupations, urban individuals with post-graduate degrees, and producer service workers in Chinese cities, as well as a “global connectivity wage discrimination” for clerks and manual workers, urban individuals with no bachelor degree, and consumer service workers. The results confirm the positive association between the degree of global cityness and the level of wage inequality in globalizing China and suggest the presence of mechanisms specific to the Chinese case that undermine the city-wide spillover effects of high-skilled labor forces in globally oriented sectors. It echoes the recent call for “provincializing” global city studies and highlights an additional source of inequality in relation to China’s unrelenting trajectory toward a rising role in the world city network.

Minimum wage impacts on Han-minority Workers’ wage distribution and inequality in urban china

This paper examines the distributional impacts of the minimum wage on the urban wages of Han-minority workers and the implications for urban inequality. County-level minimum wage data is combined with recent proprietary household survey data representative of China’s ethnically diverse areas. The identification strategy relies on an unconditional quantile regression framework that takes into account policy endogeneity using an instrument variable approach. The findings show that minimum wages lead to wage compression along the bottom and middle parts of the urban wage distribution. The minimum wage effects are larger for lower-skilled workers located in ethnic minority counties or that belong to an ethnic minority group. Counterfactual analysis further shows that minimum wages help to significantly reduce aggregate urban wage inequality: increasing minimum wages from a counterfactual benchmark to their observed levels, an average increase of 26%, reduces the Gini coefficient of wages by 10–12%.

Economía creativa y salarios urbanos en México

<p>Esta investigación analiza los efectos que produce el empleo asociado a las actividades económicas creativas en los salarios urbanos en México durante los últimos años. Los resultados indican que los salarios de los empleos en industrias y ocupaciones creativas son superiores a los salarios de las actividades económicas no creativas. Asimismo, se muestra a partir de regresiones cuantílicas que el empleo creativo tiene un efecto heterogéneo a lo largo de la distribución salarial, siendo el impacto mayor en la parte superior de la distribución. El efecto heterogéneo es fundamental para entender la desigualdad salarial urbana en México.</p>

Unions, workers, and wages at the peak of the American labor movement

We study a novel dataset compiled from archival records, which includes information on men's wages, union status, educational attainment, work history, and other background variables for several cities circa 1950. Such data are extremely rare for the early post-war period when U.S. unions were at their peak. After describing patterns of selection into unions, we measure the union wage premium using unconditional quantile methods. The wage premium was larger at the bottom of the income distribution than at the middle or higher, larger for African Americans than for whites, and larger for those with low levels of education. Counterfactuals are consistent with the view that unions substantially narrowed urban wage inequality at mid-century.

Urban wage inequality and economic agglomeration

This paper explores the impact of interplay between transport costs and commuting costs on urban wage inequality and economic distribution within a new economic geography model. As in former studies, workers tend at the same time to agglomerate in order to limit transport costs of manufactured good and to disperse in order to alleviate the burden of urban costs. In this paper, we pay special attention to wages and spot light on how the urban wage inequality is determined by interplay between urban costs and transport costs. We also solve analytically the break points and the sustain points and disclose their relationships with transport costs and commuting costs in a general equilibrium model.

Urban Wage Inequality and Economic Agglomeration

This paper explorers the impact of interplay between transport costs and commuting costs on urban wage inequality and economic agglomeration within a new economic geography model. As in former study, we find that workers tend at the same time to agglomerate in order to limit transport costs of manufactured goods and to disperse in order to alleviate the burden of urban costs. In this paper, we pay special attention to wages and spot light on how the urban wage inequality is determined by the interplay between urban costs and transport costs. We also solve analytically the break points and the sustain points, and disclose their relationships with transport costs and commuting costs in a general equilibrium model.

Ownership restructuring and wage inequality in urban China

AbstractUrban income inequality is an increasingly important driver of China's overall income inequality. Using three urban household surveys for 1995, 2002 and 2007, the authors examine how change in enterprise ownership structure – one of the major features of China's economic transition – has contributed to widening urban wage inequality. While wage dispersion was higher in the private sector over the period 1995–2007, it increased faster in the public sector. However, over 50 per cent of the increase in urban wage inequality is associated with labour reallocation from the public to the private sector. Urban wage inequality may thus widen further if more labour is reallocated to the private sector.

The Geography of Wage Inequality in British Cities

Lee N., Sissons P. and Jones K. The geography of wage inequality in British cities, Regional Studies. There is widespread concern about the scale and implications of urban inequality in Great Britain, but little evidence about which cities are the most unequal and why. This paper investigates patterns of wage inequality in 60 British cities. It has two principal goals: (1) to describe which cities are most unequal; and (2) to assess the important determinants of inequality. The results show a distinct geography of wage inequality: the most unequal cities tend to be affluent and located in parts of the Greater South East of England. A central determinant of these patterns is the geography of highly skilled workers. Because of this, the geography of urban wage inequality reflects the geography of affluence more generally.

Education expansion and returns to schooling in urban China, 2001–2010: evidence from three waves of the China Urban Labor Survey

This study examines the effect of the expansion in education that occurred in the first decade of the twenty-first century on the returns to schooling in urban China for migrants and non-migrants using three waves of the China Urban Labor Survey (CULS), corresponding to 2001, 2005 and 2010. Our main finding is that the premium to education increased by about 2%–3% over a period in which there was a rapid increase in education levels. This result is consistent with the demand for skilled labor increasing at a time when China tries to move up the value-added chain and an observed increase in urban wage inequality. We find that the education premium is higher for non-migrants than migrants and higher for males than females.

The regional distribution of skill premia in urban China: Implications for growth and inequality

AbstractBased on urban household survey data, the authors find that skill premia increased significantly across all regions of China between 1995 and 2002, but only in coastal regions between 2002 and 2007. By then, these regions also displayed much wider wage inequality and thus contributed more to overall urban wage inequality than non‐coastal regions. While privatization was the main driver of skill premia in 1995–2002, China's (regionally uneven) integration into the global economy became the dominant influence in 2002–07. Reducing skill premia and inequality, the authors argue, calls for reform of the Hukou registration system which impedes skilled labour mobility and possibly also growth.

Understanding Urban Wage Inequality in China 1988–2008: Evidence from Quantile Analysis

This paper examines change in wage gaps in urban China from 1988 to 2008 by estimating quantile regressions on CHIPS data. It applies the Machado and Mata (2005) decomposition, finding sharp increases in inequality largely due to changes in the wage structure. During 2002–08, changes in the returns to education and experience have been equalizing. However, changes in other categories of wage differential—by sex, occupation, ownership, industrial sector, and province—widened inequality. The gender gap continued to rise, as did the gap between white collar and blue collar workers, and between manufacturing and other sectors.

The effect of the state sector on wage inequality in urban China: 1988–2007

This paper examines the effect of the public sector and state-owned enterprises (SOEs) on wage inequality in urban China using China Household Income Project data. It applies quantile regression analysis, the Machado and Mata decomposition to investigate how urban wage inequality was affected by the changes in wage structure and employment shares of the public sector and SOEs. We find that since the radical state sector reforms designed to reduce overstaffing and improve efficiency in the late 1990s, urban wage gaps were narrowed due to the reduction in the employment share of the state sector; the wage premium of the state sector in comparison with the non-state sector increased significantly; and changes in the wage structure of the labour market caused the rise in urban wage inequality.

The Effects of the State Sector on Wage Inequality in Urban China: 1988–2007

This paper examines the effects of state sector domination on wage inequality in urban China. Using Chinese Household Income Project surveys, we conduct two exercises: with quantile regression analysis, we identify wage gaps across the distribution and over time; and we employ the Machado and Mata (2005) decomposition to investigate how urban wage inequality was affected by the changes in wage structure and employment share of the state sector. We find that since the radical state sector reforms designed to reduce over-staffing and improve efficiency since the late 1990s, urban wage gaps were narrowed due to the reduction of employment share in the state sector; the wage premium of the state sector in comparison with the non-state sector increased significantly; and changes in the wage structure of the labour market caused the rise in urban wage inequality.

The Effect of India's Economic Liberalization on Urban Wage Inequality: Evidence from a Synthetic Control Approach

We analyze the medium- and long-term consequences of India’s economic and trade liberalization on three ratios of skill premia using data from the UBS Prices and Earnings surveys from 1982 to 2009. We apply the synthetic control method to construct wage trends for the city of Mumbai under the counterfactual scenario of no reforms. We find that in the first phase after the 1991 liberalization medium-skilled wages fell relative to high- and low-skilled wages. From the late 1990’s on the growth of high-skilled wages outpaced the wages of the other two skill groups, pointing to new forces of globalization kicking in after the initial reforms. Overall, our results suggest that different skill levels exhibit substantively different time trends, and we confirm a general increase in wage inequality.

Changes in Job Structure and Rising Wage Inequality in Urban China, 1995-2007

We use household surveys from 1995, 2002, and 2007 to examine how changes in job structure contributed to China's rising urban wage inequality, considering three job characteristics: occupation, industry, and firm ownership. The explanatory power of job structure for wage inequality increased between 1995 and 2007. Both the change in relative number of jobs (composition effect) and the change in between-job and within-job wage gaps (price effect) contributed to rising wage inequality. Price effect was the major contributor, whereas composition effect played a larger role in the 1995-2002 period than in the 2002-2007 period, and at the lower-half distribution. Between-job inequality played a major role in the first period, and within-job inequality played a major role in the second period. Our results suggest that both technological change and institutional features influence job structure and wage inequality.