Earnings Differences between Chinese and Indian Wage Earners, 1987-2004

22 Pages Posted: 23 May 2008

See all articles by Olivier Bargain

Olivier Bargain

IZA Institute of Labor Economics; University College Dublin (UCD)

Sumon K. Bhaumik

Aston University - Aston Business School; Institute for the Study of Labor (IZA); University of Michigan at Ann Arbor - Stephen M. Ross School of Business, William Davidson Institute

Manisha Chakrabarty

Indian Institute of Management Calcutta

Zhong Zhao

Institute for the Study of Labor (IZA); Renmin University of China

Abstract

This paper is one of the first comprehensive attempts to compare earnings in urban China and India over the recent period. While both economies have grown considerably, we illustrate significant cross-country differences in wage growth since the late 1980s. For this purpose, we make use of comparable datasets, estimate Mincer equations and perform Oaxaca-Blinder decompositions at the mean and quantile decompositions at different points of the wage distribution. The initial wage differential in favour of Indian workers, observed in the middle and upper part of the distribution, partly disappears over time. While the 1980s Indian premium is mainly due to higher returns to education and experience, a combination of price and endowment effects explains why Chinese wages have caught up, especially since the mid-1990s. The price effect is only partly explained by the observed convergence in returns to education; the endowment effect is driven by faster increase in education levels in China and significantly accentuates the reversal of the wage gap in favour of this country for the first half of the wage distribution.

Keywords: returns to education, earnings, India, China, quantile regression, Oaxaca-Blinder decomposition

JEL Classification: O15, J24, O53, P52

Suggested Citation

Bargain, Olivier and Bhaumik, Sumon K. and Chakrabarty, Manisha and Zhao, Zhong, Earnings Differences between Chinese and Indian Wage Earners, 1987-2004. , Vol. , pp. -, . Available at SSRN: https://ssrn.com/abstract=1136446 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Olivier Bargain (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland
+353 1 716 8357 (Phone)
+353 1 283 0068 (Fax)

HOME PAGE: http://www.ucd.ie/economics/staff/obargain/obargain.htm

Sumon K. Bhaumik

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, West Midlands B47ET
United Kingdom

Institute for the Study of Labor (IZA) ( email )

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

University of Michigan at Ann Arbor - Stephen M. Ross School of Business, William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Manisha Chakrabarty

Indian Institute of Management Calcutta ( email )

Joka
D.H Road
Kolkata, West Bengal 700104
India

Zhong Zhao

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

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