Earnings Differentials and Ownership Structure in Chinese Enterprises
44 Pages Posted: 5 Apr 2004
This paper analyses the determinants of earnings differentials among enterprises of different ownership in urban China in 1995, using an extended version of Oaxaca-Blinder decomposition methods. We find strong evidence of a non integrated multi-tiered labor market in China, pure ownership-related differences and differences in hours worked being the major determinants of observed earnings gaps. Our results highlight different paying schemes among domestic enterprises as well as between domestic and foreign enterprises. We stress the dual nature of domestic production structures, workers in central state-owned enterprises being highly protected as compared to other domestic enterprises. We also emphasize that foreign-invested enterprises provide higher total annual earnings mostly at the cost of a much longer working time and do not offer higher hourly earnings than large state-owned enterprises. Our results provide explanations for the very low labor mobility observed out of the large overstaffed SOEs in the 90s, which has led to massive lay-offs at the end of the decade.
Keywords: Labor market, earnings differentials, segmentation, enterprise ownership, China
JEL Classification: J31, J42, P23, O53
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