Inequality Decomposition by Factor Component: A New Approach Illustrated on the Taiwanese Case

The issue of measuring the relative importance of income factors in the distribution of household income is at the heart of studies of changes in income inequality. Usual decompositions methods mostly based on Shorrocks (1982) framework allow for a broad evaluation of the contribution of income sources. These decomposition procedures however suffer from two strong drawbacks: i) the share of inequality imputed to any income source is independent of the inequality measure used and, ii) the impact of changes in the marginal distribution of income sources cannot be disentangled from the effect of changes in correlation between sources. This paper generalises the methodology briefly and intuitively initiated by Burtless (1999) and provides a general framework for inequality decomposition by factor components. This method, based on the concept of rank correlation, has two main advantages over usual decomposition procedures: i) it allows for a decomposition of observed changes in the whole income distribution and not just of a specific inequality index and, ii) it enables to isolate the specific impact of marginal distribution changes of income sources as well as that of changes in correlation between sources. This paper illustrates the application of the methodology on Taiwanese data over the 1979-94 period. After a long phase of economic development with decreasing inequality, Taiwan has experienced a widening of income disparities since the end of the 70s. Many studies emphasise the role played by changes in family structure and especially to a rise in assortative mating of spouses, but fail to measure the specific impact of rising correlation between spouses' income. Using the methodology developed in the first part of the paper, we find that changes in the earning structure of household members have been strongly unequalizing and that the main force comes from the rise in the correlation between spouses' earnings.

Human Capital and Growth: What Can we Learn from Micro-data? Evidence from Taiwan (1976-95)

This paper uses micro-data to define aggregate human capital stock indicators and proposes various specifications to test for the role of human capital accumulation on economic growth. An empirical evaluation on the Taiwanese experience over the 1975-96 period suggests that: (i) the use of alternative human capital measures does not allow for the identification of significant differences with usual indicators when estimating the direct contribution of human capital accumulation to economic growth, (ii) specifying indirect channels through which human capital accumulation may affect economic growth allows for a clear identification of external effects arising through intersectoral interactions.Taiwan., externality, experience, human capital, economic growth

Rural households'decisions towards income diversification: Evidence from a township in northern China

Economic reforms in rural China have brought opportunities to diversify both within-farm activities and off-farm activities. Participation in these activities plays an important role in increasing rural households' income. This paper analyzes the factors that drive rural households and individuals in their income-source diversification choices in a Northern China township. At the household level, we distinguish three types of diversification as opposed to grain production only: within farm (non-grain production) activities, local off-farm activities, and migration. We find that land availability stimulates on-farm diversification. Local off-farm activities are mostly driven by households' assets position and working resources, while migration decisions strongly depend on the household size and composition. At the individual level, we analyze the determinants of participation in three different types of jobs as compared to agricultural work: local off-farm employment, local self-employment and migration. We find a clear gender and age bias in access to off-farm activities that are mostly undertaken by male and by young people. The households' assets position as well as village networks are found to strongly affect participation in off-farm activities.income-source diversification; agricultural households; off-farm employment; China

The Evolution of Gender Earnings Gaps and Discrimination in Urban China, 1988-95

This paper analyzes the impact of market liberalization on gender earnings differentials and discrimination against women in urban China at the beginning of the 1990s. The observed stability in the overall gender earnings gap between 1988 and 1995 is shown to result from a complex set of evolutions across enterprises, earnings distributions, and time. Our results highlight the interplay of opposing forces, with economic reforms contributing to changes in managers' behaviors in different dimensions. On the one hand, by bringing more competition, liberalization favored a reduction in discriminating behaviors in both urban collectives and foreign-invested enterprises; on the other hand, by relaxing institutional rules, it led to a loosening of the government's egalitarian wage-setting policies, leaving more space for discrimination in state-owned enterprises.

Urban income inequality in China revisited, 1988-2002

Using newly available spatial price deflators, this paper shows that inequality evaluations in the literature overstate the magnitude of inequality and inequality changes in China, as well as the role played by regional differences in the observed inequality rise duringthe 1990s.Inequality; China; Spatial price-deflators; Inequality decomposition

Wage Differentials and Ownership Structure in Chinese Enterprises

This paper analyses the determinants of wage differentials among different ownership enterprises in urban China in 1955,using an extended version of Oaxaca-Blinder decomposition methods. We find higher wages in state-owned and foreign-invested enterprises compared to urban collectives, but no significant difference in hourly wages between central state-owned and foreign-invested enterprises. Moreover, we find strong evidence for segmentation on the Chinese labor market, the conjunction of segmentation and differences in hours worked being the major determinant of observed differences. We also show that, although foreign-invested enterprises allow for higher global annual income, it is at the cost of longer working hours.China., enterprise ownership, segmentation, labour market

Urban income inequality in China revisited (1988–2002)

Using newly available spatial price deflators, this paper shows that inequality evaluations in the literatureoverstate the magnitude of inequality and inequality changes in China, as well as the role played by regional differences in the recent inequality rise.Inequality; China; Spatial price deflators; Inequality decomposition

The Evolution of Gender Earnings Gaps and Discrimination in Urban China: 1988-1995

This paper analyzes the impact of market liberalization on gender earnings differentials and discrimination against women in urban China at the beginning of the 90s. The observed stability in the overall gender earnings gap between 1988 and 1995 is shown to result from a complex set of evolutions across enterprises, earnings distributions and time. Our results highlight the interplay of opposing forces, economic reforms contributing to changes in managers’ behaviors in different dimensions. On the one hand, by bringing more competition, liberalization favored a reduction in discriminating behaviors in both urban collectives and foreign-invested enterprises; on the other hand, by relaxing institutional rules, it led to a loosening of the government’s egalitarian wage setting policies, leaving more space for discrimination in state-owned enterprises.gender earnings differentials, discrimination, enterprise ownership, urban China

Wage Differentials and Ownership Structure in Chinese Enterprises

This paper analyses the determinants of wage differentials among different ownership enterprises in urban China in 1955,using an extended version of Oaxaca-Blinder decomposition methods. We find higher wages in state-owned and foreign-invested enterprises compared to urban collectives, but no significant difference in hourly wages between central state-owned and foreign-invested enterprises. Moreover, we find strong evidence for segmentation on the Chinese labor market, the conjunction of segmentation and differences in hours worked being the major determinant of observed differences. We also show that, although foreign-invested enterprises allow for higher global annual income, it is at the cost of longer working hours.China., enterprise ownership, segmentation, labor market