Earnings differences between Chinese and Indian wage earners, 1987-2004

Olivier Bargain, Sumon Bhaumik, Manisha Chakrabarty, Zhong Zhao

Research output: Contribution to journalArticlepeer-review


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 at different points of the wage distribution. The initial wage differential in favor 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 favor of this country for the first half of the wage distribution.
Original languageEnglish
Pages (from-to)562-587
Number of pages26
JournalReview of income and wealth
Issue numbers1
Early online date22 Jun 2009
Publication statusPublished - Jul 2009


Dive into the research topics of 'Earnings differences between Chinese and Indian wage earners, 1987-2004'. Together they form a unique fingerprint.

Cite this