Pre-Reform Industry and The State Monopsony in China

Louis Putterman and Xiao-yuan Dong

No 94, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: This paper concerns employment and wage determination in the state industrial sector in China, focusing on the pre-reform era as a baseline. We argue that in that period, the sector faced an upward sloping supply curve of labor, and we provide statistical evidence for this proposition. We then present a two-sector model in which the Chinese state acts as a monopsonist maximizing industrial profits (investment) subject to an agricultural production constraint. Finally, we analyze two sets of data providing evidence of monopsonistic behavior, and discuss corroborating evidence in the extant literature and suggest implications for future research.

Pages: pages
Date: 1997-10-01
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Journal Article: Prereform Industry and State Monopsony in China (2000)
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