Temporal and regional variation in earnings inequality: Urban China in transition between 1988 and 1995

This paper examines trends in earnings inequality in urban China between 1988 and 1995, focusing on regional variations in earnings determination and economic growth. Specifically, we examine how returns to human capital and political capital changed during this period and how these changes varied across cities experiencing differential rates of economic growth. We find that net returns to schooling almost doubled for both men and women during this period. Returns to party membership, net of other factors, more than doubled. However, these increases in returns to human capital and political capital do not account for a sharp rise in the overall level of inequality. Consistent with earlier research based on cross-sectional data, increases in returns to schooling were depressed in cities experiencing greater levels of economic growth in the intervening period.