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Determinants of Wage Gap Between Public Sector and Private Sector

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Economic Transition and Labor Market Reform in China

Abstract

It has been argued that China’s economic reform is incomplete. For example, most small state-owned enterprises (SOEs) were privatized, but the governance of large SOEs scarcely changed. Did ownership reforms influence wage structure in China? Chapter 3 focuses on the wage gaps between the public sector and private sector. It analyzes the changes in wage structures and determinants of wage gap between public sector and private sector during the period from 1995 to 2013. It is found that with the progress of market-oriented economic reform, labor productivity characteristics based on individual human capital such as schooling years are more highly rewarded, which shows that market mechanisms began to function and correct the distortion of wage decisions in China during the economic transition period.

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Notes

  1. 1.

    Because this chapter focuses on wage gaps between the two sectors, it is believed that sample selection bias appears in the worker’s choice of public or private sector employment. Therefore, the unemployed are not sampled in this analysis and a probit regression model is used.

  2. 2.

    Job search routes and the married status variables are used as identification variables in this chapter for several reasons. First, the government is likely to exert greater influence on labor arrangements in the public sector; so if the worker gained the first job by government mediation, the possibility of working in the public sector is relatively higher in the research year. Second, according to statistical discrimination theory, in the private sector, if employers consider the average work willingness of single women higher than that of married women, it is thought that the possibility for the married women to be employed is lower than for single women. Because gender equality in employment was promoted in the public sector during the planned economy period, it can be thought that the influence of marriage status on public sector employment is smaller.

  3. 3.

    It is debated that there exists an index number problem in the Blinder–Oaxaca model. Estimated results may vary with the kinds of comparison groups utilized. Given space constraints and because the two sets of decomposition results are almost identical, only estimated results using Eq. (3.3a) are presented in this chapter.

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Authors and Affiliations

  1. Hitotsubashi University, Tokyo, Japan

    Xinxin Ma

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  1. Xinxin Ma
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Ma, X. (2018). Determinants of Wage Gap Between Public Sector and Private Sector. In: Economic Transition and Labor Market Reform in China. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-1987-7_3

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  • DOI: https://doi.org/10.1007/978-981-13-1987-7_3

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  • Publisher Name: Palgrave Macmillan, Singapore

  • Print ISBN: 978-981-13-1986-0

  • Online ISBN: 978-981-13-1987-7

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