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Skill Premium, Biased Technological Change and Income Differences

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  • Wei Zou
  • Lan Liu
  • Ziyin Zhuang

Abstract

Using 1987–2006 panel data for China, we explore the dynamics of the skill premium. The present paper focuses on the skill premium as an explanation for why income differences are so large in China. Our empirics show that: the rise in the relative supply of skilled labor results in an increase, instead of a decrease, in the skill premium; domestic investment is not complementary with skill formation; the skillpremium is higher in more developed provinces; economic openness facilitates an increase in the skill premium; whether foreign direct investment induces skill‐based technology change or not, it drives up the skillpremium. An array of policy prescriptions for reducing income differences and ensuring sustained economic growth are provided.

Suggested Citation

  • Wei Zou & Lan Liu & Ziyin Zhuang, 2009. "Skill Premium, Biased Technological Change and Income Differences," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(6), pages 64-87, November.
    • Handle: RePEc:bla:chinae:v:17:y:2009:i:6:p:64-87
    DOI: 10.1111/j.1749-124X.2009.01174.x
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    Cited by:

    1. Harris, Richard G. & Robertson, Peter E., 2013. "Trade, wages and skill accumulation in the emerging giants," Journal of International Economics, Elsevier, vol. 89(2), pages 407-421.
    2. Xu, Yun & Ouyang, Alice Y., 2017. "Tariffs, relative prices and wage inequality: Evidence from China," China Economic Review, Elsevier, vol. 46(C), pages 97-109.
    3. Jiantao Zhou & Eddie Chi‐Man Hui, 2022. "The hukou system and selective internal migration in China," Papers in Regional Science, Wiley Blackwell, vol. 101(2), pages 461-482, April.

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