The Effects of Market Liberalization on the Relative Earnings of Chinese Women

Abstract

In this paper we first explore the effects of differences in labor market institutions and the degree of market liberalization on the size and composition of gender wages gaps in China's urban labor markets. We use enterprise-ownership type, enterprise age, and workers' methods of finding employment as proxies for the extent of market liberalization. We find both the size of the wage gaps and the proportion of the gap left unexplained by differences in productive characteristics largest in the most liberalized (joint venture) sector, and smallest in the least liberalized (state) sector. We next investigate the effects of differences in wage structure on the gender wage gaps. We find that differences in wage structure, in general, and the degree of wage dispersion, in particular, are extremely important in accounting for the larger wage gaps in the joint venture and collective sectors relative to the state-owned sector.

Gender Earnings Differentials and Regional Economic Development in Urban China, 1988–97

“…A recent study by Kanbur and Zhang (2005) analyzed Chinese provincial inequality for the period 1952–2000 and concluded that provincial inequality in China has consistently risen since the reforms, and that a substantial inland–coastal inequality has existed since the late 1980s. Their findings are in line with the results of earlier studies indicating that regional disparity was strongly associated with the implementation of economic reforms (Gustafsson and Li, 2000; Maurer‐Fazio and Hughes, 2002; Song et al ., 2000; Zhang and Zhang, 2003).…”

“…Furthermore, one could argue that the decomposition methods proposed by Neumark (1988) or Cotton (1988) may also be relevant. Studies of Jolliffe and Campos (2005), Maurer‐Fazio and Hughes (2002), and Liu et al . (2000) are among the examples of studies taking this approach.…”

“…This effect has been confirmed by an empirical study using plant and firm data (Hellerstein et al ., 2002). Classifying samples of females and males into market and non‐market groups (as was done by Meng, 1998) or by types of enterprise ownership (for example, Liu et al ., 2000; Maurer‐Fazio and Hughes, 2002), has consistently shown that the discriminatory (unexplained) component of the gender wage differential was smaller than the explained component in more competitive sectors.…”

“…(2002), Jolliffe and Campos (2005), Liu et al . (2000), and Maurer‐Fazio and Hughes (2002) have all propounded such arguments. The possibility of a reduction in the gender earnings gap resulting from market competition cannot, therefore, be neglected in China's transition economy.…”

“…(For a brief discussion of the wage reforms, see Yueh, 2004.) Jolliffe and Campos (2005) and Maurer‐Fazio and Hughes (2002) have argued that the decentralization of remuneration decisions allowed managers to reward workers according to their productivity, and this, in turn, provided managers more freedom to engage in discriminatory practices. In short, the collapse of central planning has provided room for discrimination.…”