Real Wages and Skill Premia in China, 1858-1936

Abstract

What happens to wage inequality when a country begins to trade and industrialize? I construct new wage series for China from 1858 to 1936. I collect the nominal wages from the records of the China Maritime Customs, and estimate real wages for unskilled and skilled workers using new group-specific cost of living indices. I find that unskilled real wages were stagnant, but skilled wages rose rapidly before 1920 and fell thereafter. My findings suggest that technological advances increased skill demand, driving up the skill premium. Educational progress eventually increased the supply of skilled workers, thereby reducing the skilled wage.