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What caused the 'marginal-products-of-labour wage gap' in state-owned enterprises in China during the early-reform era? A reconsideration based on a case study in Henan


  • Go Yano
  • Maho Shiraishi
  • Xohrat Mahmut


The marginal-products-of-labour (MPL) wage gap is studied in the early-reform Chinese economy, using the Olley-Pakes estimation technique to estimate the production function, based on micro data including different categories of labour. From this measurement of MPL-wage gaps and econometric analyses, several conclusions are drawn. First, the MPL-wage gap was anomalously large for managers in state-owned enterprises (SOEs) compared with other categories of labour. Second, the large MPL-wage gap of managers raised the average MPL-wage gap across various categories of labour, resulting in higher than the average wage MPL throughout the entire workforce, which is regarded as homogeneous. Third, the large MPL-wage gap, or, in other words, the under-employment of managers, occurred not only because the state still centrally employed and allocated labour to SOEs, but because the economy faced a labour-supply constraint of managers in early-reform China. This observation supports a modified version of the state labour-monopsony hypothesis.

Suggested Citation

  • Go Yano & Maho Shiraishi & Xohrat Mahmut, 2011. "What caused the 'marginal-products-of-labour wage gap' in state-owned enterprises in China during the early-reform era? A reconsideration based on a case study in Henan," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 9(3), pages 217-238.
  • Handle: RePEc:taf:jocebs:v:9:y:2011:i:3:p:217-238
    DOI: 10.1080/14765284.2011.592351

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    References listed on IDEAS

    1. Hay, Donald & Morris, Derek & Liu, Guy & Yao, Shujie, 1994. "Economic Reform and State-Owned Enterprises in China 1979-87," OUP Catalogue, Oxford University Press, number 9780198288459.
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