Who Gets Money First? Monetary Expansion, Ownership Structure and Wage Inequality in China

Peiwen Bai and Wenli Cheng

No 01-14, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: With the help of a simple model this paper formulates a hypothesis that a monetary expansion in the Chinese context of a segmented labor market has the effect of widening the wage gap between state and non-state workers. We argue that the reason for the increase in wage differential is that SOEs are in a privileged position to receive new money first which means the wage rate of SOE workers are raised first. It is only after the new money reaches the non-state sector via spending, does the wage rate of non-state workers rise with a delay and probably to a lesser extent. Our empirical analysis based on 10 sectors in China over the period 1990 to 2011 supports our hypothesis.

Keywords: monetary expansion; labor market segmentation; wage differential between state and non-state workers in China (search for similar items in EconPapers)
JEL-codes: E51 J31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-04
New Economics Papers: this item is included in nep-lma, nep-mac, nep-mon and nep-tra
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Citations: View citations in EconPapers (1)

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