A nonparametric analysis of insufficient wage incentives in the Chinese health industry

ABSTRACT

This study provides empirical results on the insufficient wage incentives in the Chinese health industry, which may result in the poor productivity of high-ability medical personnel. We first propose a signaling game by capturing the progressive wage incentive in this industry. Then, we show that the model primitives are nonparametrically identified and estimable using recently developed methodologies related to measurement errors. Adopting a dataset from the China Household Income Project, we provide empirical evidence of the negative influence of insufficient wage incentives on the productivity of high-ability workers, especially those in higher job positions. As the number of high-ability workers in higher job positions is high, it is important to improve wage incentives in the Chinese health industry, especially for workers in higher job positions, to promote the productivity of high-ability medical workers.