Determinants of Earnings and Gender Earnings Gaps among Highly Educated Workers within Major Cities in Asian Countries*

• Published date: 01 June 2021
• Author: Mamiko Takeuchi
• Date: 01 June 2021
• DOI: http://doi.org/10.1111/asej.12242

Determinants of Earnings and Gender Earnings

Gaps among Highly Educated Workers within

Major Cities in Asian Countries*

Mamiko Takeuchi

Received 29 April 2019; Accepted 29 April 2021

The present paper analyzes determinants of earnings and the gender earnings gap

among highly educated younger workers from nine major cities in Asian coun-

tries. We identify skill premiums for both men and women in each city, such as

holding a postgraduate degree or degrees in specif‌icf‌ields and experience working

or studying abroad. These results show that competition for earnings among

highly educated younger workers has been increasing in these cities. Furthermore,

the results reveal that, despite being quite narrow, signif‌icant gender gaps do exist;

the means of log female earnings in each city range between 95.6 and

97.9 percent of those of men. Individuals having natural science degrees or mana-

gerial positions possibly affects these small gender gaps in some cities.

Keywords: Asian countries, highly educated workers, specif‌ic abilities, gender

earnings gap.

JEL classif‌ication codes: I26, J24, J71.

doi: 10.1111/asej.12242

I. Introduction

The economics literature on wage inequality has typically focused on wage dif-

ferentials between differently educated groups, often between college graduates

and non-graduates. Most studies reveal growth in such differentials during the

1980s and early 1990s (e.g. Walker and Zhu, 2011). However, simply focusing

on average differences between groups can obscure some of the overall change

in inequality. Wages also vary within g roups with different levels of education,

and it has been argued that much of the overall increase in wage inequality has

been due to an increase in this residual inequality (e.g. Katz, 1999; Gosling

et al., 2000).

Studies into the return to education have attracted great interest since the

development of the human capital theory in the mid-1960s, with decisive

*Takeuchi (corresponding author): Faculty of Economics, Aichi Gakuin University, 3-1-1 Meijo,

Kita-ku, Nagoya, Aichi 4628739, Japan. Email: take@dpc.agu.ac.jp

© 2021 East Asian Economic Association and John Wiley & Sons Australia, Ltd.

Asian Economic Journal 2021, Vol.35 No. 2, 166–186 166

contributions by Schultz (1960, 1961), Becker (1964) and Mincer (1974). More-

over, there is growing discontent with the use of variables related to formal edu-

cation as a proxy for human capital because these variables might not ref‌lect the

skills that are actually acquired by individuals. Therefore, this paper analyses

within-group wage inequality, specif‌ically focusing on graduate groups, as they

are the fastest growing cohorts in Asian countries, in this case, China, India,

Indonesia, Korea, Malaysia, Thailand and Vietnam. The paper also contributes

to ongoing efforts to account for skill heterogeneity among college graduates by

supplementing variables with college major, postgraduate degree and experience

working or studying abroad in the earnings functions. These are suitable proxies

for skills.

1

The number of young workers in developing Asian countries who have higher

education qualif‌ications has been increasing.

2

According to Choi (1996), a shift

in the Korean education policy in 1980 suddenly increased the number of col-

lege entrants; furthermore, changes in technology in Korea during the 1980s

increased the relative demand for more educated workers, especially those with

college degrees. Chi et al. (2011) point out that as the proportion of educated

workers increases, the mean income and dispersion of earnings should increase

as educated workers tend to receive higher wages. Thus, having a higher propor-

tion of educated workers leads to greater within-group earnings dispersion in

China. Truong et al. (2021) also mention that access to higher education is

growing faster in ASEAN countries of Vietnam, Indonesia and Thailand. One

of the commonly cited reasons for this phenomenon is the change in employ-

ment opportunities during the process of globalization that has enabled skilled

workers to become more valuable. Marouani and Nilsson (2016) argue that the

Malaysian Government’s higher education policy is based on a willingness to

rapidly increase the share of skilled labor in the economy and, thus, increase the

supply of educated workers. According to Reddy et al. (2016), one in every four

graduates in the world will be a product of the Indian education system

by 2030.

The abovementioned studies discuss the popularization of higher education at

a national level. However, it is important to examine the inequality of earnings

separately in rural and urban settings, particularly in Asian countries (Chi

et al., 2011), where highly educated workers tend to concentrate in metropolitan

areas. There is a growing body of evidence in economics literature indicating

that wages are higher in large urban areas, especially those for highly skilled

workers (e.g. D’Costa and Overman, 2014). The presence of large numbers of

1 In economics, the word ‘skill’includes a wide variety of qualif‌ications, experience and cognitive

or physical skills; it also includes professional occupation, and subjects of degrees or advanced

degrees. These skills contribute to the rising college premium mainly through the price effect

(Capatina, 2014).

2 According to UNESCO (2014), global higher education enrollment increased from 32.6 million

in 1970 to 182.2 million in 2011, 46 percent of which was in the East Asian and South Asian

regions in 2011.

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