The second basic approach is represented by John Maynard Keynes's theory of income determination.
The model of income determination presented above is exceedingly simple; it captures little of the complexity of a modern industrialized economy.
The second major breakthrough of the 1930s, the theory of income determination, stemmed primarily from the work of John Maynard Keynes, who asked questions that in some sense had never been posed before.
Moreover, studies also show that the income determination mechanism differs greatly across regions.
Therefore, we need to develop a more comprehensive analytical framework to effectively understand the process of income determination in China.
In the end, we also add cross-level interactions between individual characteristics and region/industry factors to explore possible macro micro linkages to income determination.
However, with one exception (Wang and Cui 2010), there is essentially no study that explores the macro micro interactions between industry and individual characteristics with respect to income determination.
According to market transition theory (Nee 1989), due to systematic differences in income determination between a market economy and a redistributive economy, marketization will necessarily increase income returns from human capital and depreciate the value of political capital at the same time.
Different from classical economic theory, which views wages or income as the price of human capital (such as skills and work experiences) in the labor market, and which are in turn determined by the supply and demand forces of market competition, sociological theory generally emphasizes the socio-structural and institutional facets of income determination.
Third, taking as our starting point the dual labor market segmentation by industry and region, we extend our analysis of income inequality by including other important social and structural factors for income determination such as gender, residence type, education, occupation, party membership, and type of work unit.
