Using data from the 2010 China Family Panel Study and the county- and industrial-level statistics, we estimate cross-classified multilevel models to examine the determinants of income gap among Chinese workers.Results show that both regional and industrial differences are important sources of income inequality in China.Taken together, they account for about onefifth of the total variation of individual income.Among them, regional difference explains 7 percent of the total variation, while industrial difference accounts for 14 percent of the total variation.Further analyses demonstrate that regional and industrial characteristics have significant independent effects on individual income even after controlling for individual socio-demographics and human capital resources.We also explore the potential mechanisms through which macro-level factors function in the elevated income inequality in China.

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