What caused the 'marginal-products-of-labour wage gap' in state-owned enterprises in China during the early-reform era? A reconsideration based on a case study in Henan

Go Yano, Maho Shiraishi and Xohrat Mahmut

Journal of Chinese Economic and Business Studies, 2011, vol. 9, issue 3, 217-238

Abstract: The marginal-products-of-labour (MPL) wage gap is studied in the early-reform Chinese economy, using the Olley-Pakes estimation technique to estimate the production function, based on micro data including different categories of labour. From this measurement of MPL-wage gaps and econometric analyses, several conclusions are drawn. First, the MPL-wage gap was anomalously large for managers in state-owned enterprises (SOEs) compared with other categories of labour. Second, the large MPL-wage gap of managers raised the average MPL-wage gap across various categories of labour, resulting in higher than the average wage MPL throughout the entire workforce, which is regarded as homogeneous. Third, the large MPL-wage gap, or, in other words, the under-employment of managers, occurred not only because the state still centrally employed and allocated labour to SOEs, but because the economy faced a labour-supply constraint of managers in early-reform China. This observation supports a modified version of the state labour-monopsony hypothesis.

Keywords: marginal products of labour-wage gap; Olley-Pakes estimator; different categories of labour; labour-monopsony hypothesis; supply constraints of managers (educated workers) (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1080/14765284.2011.592351

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