Title: Wage Differentials and Ownership Structure in Chinese Enterprises
Reference Number: 1076
Publication Date: October 2003
JEL Classifcation: J31, J42, P23, O53

Yi Chen
CERDI, University of Auvergne

Sylvie Demurger
CERDI, CNRS and HIEBS, The University of Hong Kong

Martin Fournier
CEFC, Hong Kong

This paper analyses the determinants of wage 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 multi-tiered labor market in China, pure ownership-related differences and differences in hours worked being the major determinants of observed wage 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 wages than 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.

Published in Economic Development and Cultural Change 53 (July 2005) pp. 933-958.

Key words: labour market, wage differentials, segmentation, enterprise ownership, China

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Last modified: 05/28/2007