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Who Gets Money First? Monetary Expansion, Ownership Structure and Wage Inequality in China

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  • Peiwen Bai
  • Wenli Cheng

Abstract

With the help of a simple model this paper formulates a hypothesis that a monetary expansion in the Chinese context of a segmented labor market has the effect of widening the wage gap between state and non-state workers. We argue that the reason for the increase in wage differential is that SOEs are in a privileged position to receive new money first which means the wage rate of SOE workers are raised first. It is only after the new money reaches the non-state sector via spending, does the wage rate of non-state workers rise with a delay and probably to a lesser extent. Our empirical analysis based on 10 sectors in China over the period 1990 to 2011 supports our hypothesis.

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2014/0114moneybaicheng.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 01-14.

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Length: 31 pages
Date of creation: Apr 2014
Date of revision:
Handle: RePEc:mos:moswps:2014-01

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Keywords: monetary expansion; labor market segmentation; wage differential between state and non-state workers in China;

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