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China's State-Owned Enterprises in the First Reform Decade: An Analysis of a Declining Monopsony

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  • Xiao-Yuan Dong
  • Louis Putterman

Abstract

We study the evolution of employment and wage outcomes in Chinese SOEs during the first decade of economic reforms, studying a panel of data for almost 1000 enterprises covering the years 1980-90. Despite the consensus on the persistence of labor redundancy in the SOE sector, we find that capital-intensity remained so extreme that workers' marginal products exceeded their full wages, just as in a classical monopsony outcome. Consistent with expectations about the reform process, we find that the degree of monopsony declined during the 1980s, although it was not eliminated, and that monopsony was weakest where the state sector's shares of industrial output and enterprises were lowest, and for smaller enterprises and enterprises managed by lower levels of government. Our analysis also supports Xu and Zhuang's finding that bonus payments increased enterprises' revenues by more than it did their costs.

Suggested Citation

  • Xiao-Yuan Dong & Louis Putterman, 1997. "China's State-Owned Enterprises in the First Reform Decade: An Analysis of a Declining Monopsony," William Davidson Institute Working Papers Series 93, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:1997-93
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    Cited by:

    1. Cheremukhin, Anton & Golosov, Mikhail & Guriev, Sergei & Tsyvinski, Aleh, 2015. "The Economy of People’s Republic of China from 1953," CEPR Discussion Papers 10764, C.E.P.R. Discussion Papers.
    2. Fleisher, Belton M. & Wang, Xiaojun, 2003. "Potential residual and relative wages in Chinese township and village enterprises," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 429-443, September.
    3. Hoken, Hisatoshi, 2017. "Development of off-farm employment and its determinants in rural China," IDE Discussion Papers 633, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Dong, Xiao-Yuan & Putterman, Louis, 2003. "Soft budget constraints, social burdens, and labor redundancy in China's state industry," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 110-133, March.
    5. Fleisher, Belton M. & Wang, Xiaojun, 2004. "Skill differentials, return to schooling, and market segmentation in a transition economy: the case of Mainland China," Journal of Development Economics, Elsevier, vol. 73(1), pages 315-328, February.
    6. Arsenault Morin, Alex & Geloso, Vincent & Kufenko, Vadim, 2016. "Monopsony and industrial development in nineteenth century Quebec: The impact of seigneurial tenure," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 51/2016, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    7. Dong, Xiao-Yuan, 2005. "Wage inequality and between-firm wage dispersion in the 1990s: A comparison of rural and urban enterprises in China," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 664-687, December.
    8. Lee, Young, 1999. "Wages and Employment in China's SOEs, 1980-1994: Corporatization, Market Development, and Insider Forces," Journal of Comparative Economics, Elsevier, vol. 27(4), pages 702-729, December.

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