Remaking Inequality: Market Expansion and Income Stratification in Reforming State Socialism

This paper delves the impact of economic marketization on social inequality in urban China. We propose a contingent version of the market transition theory and examine how markets substantively re-shape individual’s employment choices and their associated payoffs. We identify new stratification mechanisms related to 1) the expanding private/hybrid sector, 2) the emergence of labor markets, and 3) the rise of meritocracy in firms. Quantitative analyses of income determination show that while the political domain remains a source of continuity, these three market-oriented institutional processes lead to the increase in returns to human capital and a relative decline of political advantage. Remaking Inequality: Market Expansion and Income Stratification in Reforming State Socialism Recent attempts to explain the changing stratification system in postsocialist countries have yielded a variety of causal accounts specifying a broad repertoire of mechanisms. Participants in the market transition debate point to different institutional processes that either reshape or reinforce the preexisting structure of inequality. Hence, we find competing lines of arguments that underscore the impact of economic marketization (Nee 1989), powerful network ties monopolized by the political elite (Rona-Tas 1994), persistent reproduction of the state socialist institutional order (Nee 1991; Bian and Logan 1996; Walder, Li, and Treiman 2000), farreaching state intervention (Zhou 2000a), and chaotic sub-optimal equilibrium emerging from micro-actors’ opportunistic response to economic shock therapy (Burawoy 1997; Gerber and Hout 1998). Although these mechanisms are not necessarily in contradiction with each other, each causal account claims primacy in explaining the institutional dynamics shaping the postsocialist stratification order. While such conceptual plurality is certainly related to differing theoretical orientation, disagreements over empirical evidence have also been crucial in sustaining the controversies (see AJS Market Transition Symposium 1996; Cao and Nee 2000, pp.1178). As adjudicating rival arguments becomes more and more difficult, many now believe that the solution lies in a synthesis (e.g., Szelenyi and Kostello 1996; Zhou 2000a). We think there remain other tasks. A general synthetic framework can be heuristic for charting the field and guiding future research. However, with some of the existing explanations yet to be adequately specified or tested, rushing to a synthesis runs the risks of uncritical acceptance and artificial compromise. Thus, the need for a synthesis notwithstanding, we believe