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China's Evolving Managerial Labor Market

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  • Groves, Theodore
  • Yongmiao Hong
  • John McMillan
  • Barry Naughton

Abstract

Recent reforms of Chinese state-owned enterprises strengthened a nascent managerial labor market by incorporating incentives suggestive of competitive Western labor markets. Poorly performing firms were more likely to have a new manager selected by auction, to be required to post a higher security deposit, and to be subject to more frequent review of the manager's contract. Managers could be, and were, fired for poor performance. Managerial pay was linked to the firm's sales and profits, and reform strengthened the profit link and weakened the sales link. Thus, the economic reforms helped develop an improved system of managerial resource allocation responsive to market forces. Copyright 1995 by University of Chicago Press.

Suggested Citation

  • Groves, Theodore & Yongmiao Hong & John McMillan & Barry Naughton, 1995. "China's Evolving Managerial Labor Market," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 873-892, August.
  • Handle: RePEc:ucp:jpolec:v:103:y:1995:i:4:p:873-92
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    References listed on IDEAS

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    1. Sherwin Rosen, 1990. "Contracts and the Market for Executives," NBER Working Papers 3542, National Bureau of Economic Research, Inc.
    2. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-883, December.
    3. Engelbrecht-Wiggans, Richard & Milgrom, Paul R. & Weber, Robert J., 1983. "Competitive bidding and proprietary information," Journal of Mathematical Economics, Elsevier, vol. 11(2), pages 161-169, April.
    4. Rosen, S., 1990. "Contracts and Market for Executives," University of Chicago - Economics Research Center 90-12, Chicago - Economics Research Center.
    5. Theodore Groves & Yongmiao Hong & John McMillan & Barry Naughton, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 183-209.
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