Gender, discrimination and inequality in China : some economic aspects
With the move to a more market-oriented economy in China, there is evidence of increased inequality in the incomes earned by men and women. To explore this outcome, we turn to an aspect of Chinese society that is pervasive in both economic and social contexts, namely, the Chinese variant of social capital, guanxi. It appears that in an imperfect labour market characterised by frictions, such as restricted mobility, costly job search, and limited employment alternatives, the cultivation of guanxi is important in reducing these transaction costs. The notion that investing in social capital can enhance an individual's opportunities leads to the development of a theory of discrimination that may explain the gender inequalities accompanying marketisation in China, and might be more generally relevant. The model of earnings discrimination is premised on imperfect product and labour markets. Under these conditions, we show that differential wages for similarly productive workers is a profit maximising outcome for firms. We apply this theory in an attempt to explain the trend of increasing gender inequality in earned income in urban China during the current reform period. First, pre-labour market gender inequality is investigated through developing a model of parental investment in children's human capital to discern whether there are productive differences between men and women prior to entering employment. In 1995, household expenditure on children's education is affected by perceived future earnings differentials and support of parents in retirement. Regarding labour markets, an original survey designed to test our model of social capital was administered in urban China in early 2000 and pertained to 1999. We find that there are differences between men and women in their investment in guanxi that correspond to gender inequalities in earned income and rates of re-employment. Both empirical chapters provide evidence in accordance with the predictions of the theory.