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Pre-Reform Industry and The State Monopsony in China

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  • Louis Putterman
  • Xiao-Yuan Dong

Abstract

This paper concerns employment and wage determination in the state industrial sector in China, focusing on the pre-reform era as a baseline. We argue that in that period, the sector faced an upward sloping supply curve of labor, and we provide statistical evidence for this proposition. We then present a two-sector model in which the Chinese state acts as a monopsonist maximizing industrial profits (investment) subject to an agricultural production constraint. Finally, we analyze two sets of data providing evidence of monopsonistic behavior, and discuss corroborating evidence in the extant literature and suggest implications for future research.

Suggested Citation

  • Louis Putterman & Xiao-Yuan Dong, 1997. "Pre-Reform Industry and The State Monopsony in China," William Davidson Institute Working Papers Series 94, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:1997-94
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    Cited by:

    1. Li Zhang & Simon Xiaobin Zhao, 2001. "The Impact of State Resource Allocation on Urbanisation in Socialist China," Post-Communist Economies, Taylor & Francis Journals, vol. 13(4), pages 505-524.
    2. Wang, Xiaobing & Herzfeld, Thomas & Glauben, Thomas, 2007. "Labor allocation in transition: Evidence from Chinese rural households," China Economic Review, Elsevier, vol. 18(3), pages 287-308.
    3. Scandizzo, Pasquale Lucio & Savastano, Sara, 2009. "Optimal Farm Size under an Uncertain Land Market: the Case of Kyrgyz Republic," 111th Seminar, June 26-27, 2009, Canterbury, UK 52844, European Association of Agricultural Economists.
    4. Lizal, Lubomir & Kocenda, Evzen, 2001. "State of corruption in transition: case of the Czech Republic," Emerging Markets Review, Elsevier, vol. 2(2), pages 138-160, June.
    5. Anton Cheremukhin & Mikhail Golosov & Sergei Guriev & Aleh Tsyvinski, 2015. "The Economy of People’s Republic of China from 1953," NBER Working Papers 21397, National Bureau of Economic Research, Inc.
    6. Yoko Asuyama & Mami Yamaguchi, 2014. "Labor: from fixed cost to variable cost," Chapters, in: Mariko Watanabe (ed.), The Disintegration of Production, chapter 10, pages 275-306, Edward Elgar Publishing.
    7. Guriev, Sergei & Makarov, Igor & Maurel, Mathilde, 2002. "Debt Overhang and Barter in Russia," Journal of Comparative Economics, Elsevier, vol. 30(4), pages 635-656, December.
    8. Alan A. Bevan & Saul Estrin, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," William Davidson Institute Working Papers Series 342, William Davidson Institute at the University of Michigan.
    9. Yuan, Yuan & Wang, Mingshu & Zhu, Yi & Huang, Xianjin & Xiong, Xuefeng, 2020. "Urbanization’s effects on the urban-rural income gap in China: A meta-regression analysis," Land Use Policy, Elsevier, vol. 99(C).
    10. Tony Fang & Morley Gunderson & Carl Lin, 2021. "The impact of minimum wages on wages, wage spillovers, and employment in China: Evidence from longitudinal individual‐level data," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 854-877, May.
    11. 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.
    12. 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.
    13. Guriev, Sergei & Cheremukhin, Anton & Golosov, Mikhail & Tsyvinski, Aleh, 2015. "The Economy of People’s Republic of China from 1953," CEPR Discussion Papers 10764, C.E.P.R. Discussion Papers.
    14. Wang, Xiaobing, 2007. "Labor market behavior of Chinese rural households during transition," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 42, number 92321.
    15. Walsh, Patrick Paul & Whelan, Ciara, 2001. "Firm performance and the political economy of corporate governance: survey evidence for Bulgaria, Hungary, Slovakia and Slovenia," Economic Systems, Elsevier, vol. 25(2), pages 85-112, June.
    16. Sara Savastano & Pasquale Lucio Scandizzo, 2009. "Optimal farm size in an uncertain land market: the case of Kyrgyz Republic," Agricultural Economics, International Association of Agricultural Economists, vol. 40(s1), pages 745-758, November.
    17. 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.
    18. 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.
    19. 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.
    20. Gu, Tao, 2019. "Wage determination and fixed capital investment in an imperfect financial market: the case of China," MPRA Paper 95986, University Library of Munich, Germany.
    21. Imai, Hiroyuki, 2000. "The Labor Income Tax Equivalent of Price Scissors in Prereform China," Journal of Comparative Economics, Elsevier, vol. 28(3), pages 524-544, September.

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