SOE wage premium in China: new evidence

Qian Sun ()
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Qian Sun: Shanghai University of International Business and Economics

Empirical Economics, 2023, vol. 64, issue 3, No 4, 1147 pages

Abstract: Abstract This paper investigates whether state-owned enterprise (SOE) wage premium exists in China. Our contribution is empirical and twofold. First, previous studies commonly use conventional methods, including OLS and fixed effects model, to identify SOE wage premium. It is unclear if the assumptions of these methods are met and if the evidence from these methods is subject to selection bias. In this paper, we use alternative methods to account for selection bias. The first method explores restrictions on a factor model of unobservables to identify the premium. The second method is the minimum-bias (MB) approach of Millimet and Tchernis (J Appl Econ 28:982–1017, 2013). These methods do not rely on the conventional identification assumptions and thus provide a robust check on evidence obtained from conventional methods. Our results show that significant SOE premium exists, that OLS underestimates the premium in early periods and overestimates it in recent periods, and that fixed effects method underestimates the premium. Second, we utilize data that cover a longer period than studied by previous research and thus provide estimates of the SOE wage premium for an extended period. Our results show that the premium averages at 13% in 1990–1995, 9% in 2002–2007, and 10% in 2009–2017. Our results also show considerable variation in SOE wage premium over time, between industrial sectors and between rural–urban migrant and urban local workers.

Keywords: SOE wage premium; Selection bias; Minimum bias estimator; Instrument (search for similar items in EconPapers)
JEL-codes: J31 J45 J71 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00181-022-02274-w

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