Wage structure in China, late 1990s to 2000s: a young labour market in a transforming economy
This thesis discusses the changes and corresponding causes of the wage distribution in China from the late 1990s to the 2000s. According to various data sources, real wage inequality in China has been increasing over time. People have become increasingly concerned about such a phenomenon, which can potentially cause economic instability and further social unrest. From the analysis of household survey data, a significant part of the the increase in wage dispersion in China can be attributed to changes in the institutional changes. Having gone through the institutional reform of state-owned enterprises in the late 1990s, many Chinese firms have become more privatized and smaller in size. That is to say, the Chinese labour market becomes less affected by the government intervention (through public enterprises). Changes in the supply side of the labour market have also been examined. The increase in the number of university graduates slows down the growing wage dispersion. A comparison between the household survey data and the industrial enterprises data tells a slightly different story about Chinas wage structure. As the firm-level data omits within-firm wage inequalities and excludes data of primary sectors, the service sectors, and the small businesses, a decrease in the logarithm of the wage variation has been found. The inconsistency between the changes of real wage dispersion and the dispersion of log wages has been discussed in depth in the thesis. Nonetheless, since China set the new minimum wage in 2004, the wage distribution in the countrys industrial sector has been reshaped, which is not obviously shown in the household data. The impact of increasing the national minimum wage has been evaluated under a set of relatively conservative assumptions. Further analysis has been conducted to quantify the effect of trade liberalization on wage dispersion. It turns out that starting to export on the part of the firms has a significant positive effect on firm-level wages and employments, but the impact of an increasing export exposure remains debatable.
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