fbpx Structure Change and Urban Inequality in the People’s Republic of China | Asian Development Bank

At the forefront of growth and development in Asia and the Pacific

Structure Change and Urban Inequality in the People’s Republic of China

Publication | March 2017
Structure Change and Urban Inequality in the People’s Republic of China

Developments in the service industry helped decrease urban inequality in the People's Republic of China.

The People’s Republic of China (PRC) is thought to be one of the most unequal economies in the world, but very few studies ever touched on the determinants and the evolution of its urban inequality. We firstly apply the inequality decomposition method to an urban household sample covering the period from 2003–2012, and find that wage inequality of urban households is dominated by inequality component within the service industry, and also its decline after 2008 is mainly attributable to the declining inequality component within service industry. Secondly, we provide evidence indicating that change in employment structure and wage determination in the urban labor market can help reduce wage income inequality in urban PRC. These results can help explain the fact that inequality in urban PRC no longer shows deterioration after 2008. Policy implications are also proposed.

WORKING PAPER NO: 687