"Urban income inequality is an increasingly important driver of China's overall income inequality. Using three urban household surveys for 1995, 2002 and 2007, the authors examine how change in enterprise ownership structure – one of the major features of China's economic transition – has contributed to widening urban wage inequality. While wage dispersion was higher in the private sector over the period 1995–2007, it increased faster in the public sector. However, over 50 per cent of the increase in urban wage inequality is associated with labour reallocation from the public to the private sector. Urban wage inequality may thus widen further if more labour is reallocated to the private sector."

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