Wages and Employment in China's SOEs, 1980–1994: Corporatization, Market Development, and Insider Forces

Using firm-level panel data, we evaluate the importance of reform measures, market development, and insider forces in wage and employment determination in China's state sector. Initial output per worker is positively correlated with change in employment, and market wages are significantly associated with firm employment and wages in the later period. Both indicate development of the labor markets. Corporatization lowered wages by 11 to 15% and improved productivity by 6%. Finally, we find evidence that labor markets for managers and engineers have been developed more than those for production workers and that wage premiums for college graduates have increased dramatically since the late 1980's. J. Comp. Econom., December 1999, 27(4), pp. 702–729. IRIS, University of Maryland, College Park, Maryland 20742.