Trends in China’s gender employment and pay gap: estimating gender pay gaps with employment selection

In contrast to the United States and European countries, China has witnessed a widening gender pay gap in the past two decades. Nevertheless, the size of the gender pay gap could still be underestimated as a result of not accounting for the low-wage women who have dropped out of the labor force. As shown by a large and representative set of household survey data in China, since the 1980s the female employment rate has been falling and the gap between male and female employment rates has been increasing. We estimate the bounds of the raw gender pay gap in China, taking into consideration the different male and female employment rates. To tighten the bounds, we use an instrumental variable, having a child aged less than 6 years. The results support the view that the raw gender pay gap, as large as it has been, is still underestimated.