Earnings Inequality and the Changing Association between Spouses’ Earnings in Urban China (1988-2002)

Shem Y. Shen, Chinese University of Hong Kong

China witnessed dramatic increase in earnings inequality in the past several decades. Little is known, however, about the role of marital sorting in shaping this rise. How much of the observed increase in earnings inequality among married couples in urban China could be attributed to changes in the association between spouses’ earnings? To answer this question, this paper uses data from CHIP (Chinese Household Income Project) 1988, 1995 and 2002 and four different methods in existing literature. I find that, after evaluating the deficiencies in each method and clarifying the composition of the association structure, the impact of changes in the association between spouses' earnings on trends in inequality in urban China is negligible. Only one component of the association——changes in the pattern of wives' labor force participation——have moderate disequalizing impact.