Marketisation and the wage gap between public and private sectors: evidence from China

Xinxin Ma

Post-Communist Economies, 2026, vol. 38, issue 4, 413-443

Abstract: The determinants of the wage gap between the public and private sectors have attracted global attention. However, the empirical evidence on the impact of marketisation on this wage gap remains limited. Using national longitudinal survey data from the China Family Panel Studies for the years 2010, 2012, 2014, 2016, and 2018 and employing a decomposition method, this study investigates the relationship between marketisation and the wage gap between the public and private sectors in China. The results of separate wage functions indicate that marketisation advancement may increase wages in both the public and private sectors, with a slightly larger effect observed in the private sector. Several robustness checks confirm these findings. The decomposition results show two channels that contribute to narrowing the wage gap: the differences in labour force allocations between high- and low-marketisation regions and the differences in marketisation wage premiums. The wage gap and the effects of these two channels vary across wage distributions and are more pronounced among high-wage workers than among those in the medium- and low-wage groups. These findings suggest that promoting market-oriented reforms may enhance market competition, which contributes to narrowing the wage gap.

Date: 2026
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DOI: 10.1080/14631377.2026.2634640

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