Educational Expansion and Wage Inequallity: Evidence from Urban China

Title: Educational Expansion and Wage Inequallity: Evidence from Urban China
Authors: Wang, Wei
Date: 2017-04-30
Abstract: Despite the miracle of a dramatic increase in economic performance in the People’s Republic of China (PRC), researchers are becoming increasingly concerned with income distribution and income inequality in China. Indeed, people have witnessed this growing inequality in the past two decades, and the tendency is towards a further increase. In this paper, a basic and standard human capital model is examined to understand this evolution of socio-demographic characteristics, which appear to be the reason for the widened gap of wage differential within China’s labor market, especially after the educational expansion in 1999. Based on survey data from the Chinese Household Income Project (CHIP) conducted in 1995 and 2013, I decompose the difference in variance of the logarithm of wages into 1) endowment effect; 2) price effect; and 3) the unobserved effects and carry out micro-simulation technique to explain the evolution of wage inequality during that period. The results suggest that educational expansion targeting higher educational levels does not have an equalizing effect, although such a great change in the distribution of education can accelerate the pace of economic development. However, it could also generate unpredictable pressure on China’s labor market and work in reverse to policy expectations.
CollectionÉconomie - Mémoires // Economics - Research Papers