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Wage Flexibility in Chinese Labor Market 1989-2009

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  • Peng, Fei
  • Kang, Lili

Abstract

This paper analyses wage flexibility in Chinese labor market using the China Health and Nutrition Survey (CHNS) for the period 1989-2009. China has highly coordinated wage-setting institutions which might contribute to higher wage sensitivity of the coordinated workers, but lower sensitivity in the workers with coordination failures. Using micro-data matched to local unemployment rates, we find the reaction of wages to local unemployment varies significantly across different employee groups, suggesting disparate wage setting institutions within China. The highly coordinated big firms and public sector show more significant wage flexibility than the lagging small/medium firms and private sector. Workers with characteristics of weak bargaining power also have less flexible wages. The major wage flexibility occurred in the 1990s when the labor market moved from a centrally-planned system to a market-oriented system. After the public sector retrenchment, the labor market seems recover the rigidity in the 2000s. Moreover, sensitivity test using Heckman selection model really shows significant selectivity effects, but the Heckman adjusted results would not change our basic conclusions.

Suggested Citation

  • Peng, Fei & Kang, Lili, 2013. "Wage Flexibility in Chinese Labor Market 1989-2009," MPRA Paper 46651, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:46651
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    Cited by:

    1. Fei Peng & Sajid Anwar & Lili Kang, 2020. "Job Movement and Real Wage Flexibility in Eastern and Western Parts of Germany," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(4), pages 764-789, October.
    2. Peng, Fei & Huang, Wei & Kang, Lili, 2015. "Open Economy, Global Value Chain and Corporate Social Responsibility in China," MPRA Paper 64612, University Library of Munich, Germany.
    3. Lorena M. D'Agostino & Rosina Moreno, 2019. "Green regions and local firms' innovation," Papers in Regional Science, Wiley Blackwell, vol. 98(4), pages 1585-1608, August.
    4. Lili Kang & Fei Peng, 2018. "Economic Reform and Productivity Convergence in China," Arthaniti: Journal of Economic Theory and Practice, , vol. 17(1), pages 50-82, June.
    5. Fei Peng & Sajid Anwar & Lili Kang, 0. "Job Movement and Real Wage Flexibility in Eastern and Western Parts of Germany," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 0, pages 1-26.
    6. Bayari, Celal, 2018. "Economy and Market in China: The State, Wage Labour and the Construction of the ‘China Price’," MPRA Paper 100900, University Library of Munich, Germany, revised 04 Mar 2018.

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    More about this item

    Keywords

    Wage flexibility; Local unemployment; Panel data;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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