Table Of ContentE C O N O M I C T R A N S I T I O N
A N D L A B O R M A R K E T
R E F O R M I N C H I N A
Xinxin Ma
Economic Transition and Labor Market
Reform in China
Xinxin Ma
Economic Transition
and Labor Market
Reform in China
Xinxin Ma
Hitotsubashi University
Tokyo, Japan
ISBN 978-981-13-1986-0 ISBN 978-981-13-1987-7 (eBook)
https://doi.org/10.1007/978-981-13-1987-7
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To my family and friends
P
reface
China has experienced rapid economic development and huge economic
growth since 1978. The main reason for this is that the Chinese govern-
ment promoted transition of the economic system from a planned econ-
omy to a market-oriented economy. The Chinese government enforced
gradualism reform in which the government retains and controls the pub-
lic sector (e.g. state-owned enterprises), and simultaneously promotes the
private sector (e.g. privately owned enterprises, foreign-owned enterprises,
and the self-employed sector). No other country with a transition econ-
omy, including Russia and the Central and Eastern European states, fol-
lowed this path. This uniquely gradual reform led to the mixed ownership
system in China and to new segmentation problems in the Chinese labor
market. For example, the labor market is segmented into both public and
private sectors; into the monopoly industry sector and competitive indus-
try sector; into migrant and local urban resident groups; and into the
formal sector and informal sector.
This is a significant area of academic debate. There is a set of unique
issues in these labor market segmentations that only occurred in China:
they generate valuable research questions to help us understand an imper-
fect competitive market and transition economics. The government could
usefully address the segmentation problems in the Chinese labor market
that may contribute to severe income inequality and harm social fairness
and welfare in China. Thus Part I of this book focuses on these special
issues related to the segmentation of the Chinese labor market during the
economic transition period from 1978. The overarching purpose of this
vii
viii PREFACE
book is to investigate the causes and consequences of Chinese labor mar-
ket segmentations.
As well as the transition from a planned economy to a market economy,
the government implemented a set of new policies to address problems
related to segmentation of the labor market and to enforce system reforms,
for example, the minimum wage system implemented from 1993, the
public pension system reformed from the 1990s, and the higher education
expansion policy promoted from 1999. Did these policy changes influence
labor market outcomes? Part II of this book analyzes the influence of these
policies on household and individual behaviors. The results provide reli-
able evidence to evaluate these policies and generate some suggestions for
reform. This policy evaluation not only contributes to academic debate
but also provides evidence on which to base new governmental policy.
This research was supported by the Japan Society for the Promotion of
Science (JSPS) with its grant-in-aid for scientific research (grant numbers:
25243006 and 16K03611) from 2012 to 2018, and the Joint Usage and
Research Center, Institute of Economic Research, Hitotsubashi University
from 2015 to 2018. I am grateful to Professor Li Shi (Beijing Normal
University) for providing the CHIPs data, and giving so many valuable
suggestions and comments since 2004. I acknowledge Professor Atsushi
Seike (Keio University), Professor Yoshio Higuchi (Keio University),
Professor Ryoshin Minami (Hitotsubashi University), and Professor
Katsuji Nakagane (The University of Tokyo) for their teaching and coach-
ing that opened the world of labor economics, development economics,
and transition economics and led me to become an Economics researcher.
I would like to thank Professor Jun Zhang (Fudan University), Professor
Go Yano (Kyoto University), Professor Kazufumi Yugami (Kobai
University), Professor Kai Kajitani (Kobai University), and Professor
Quheng Deng (Chinese Academy of Social Sciences) and the conference
participants for their many helpful comments in 2015 First World
Congress of Comparative Economics (WCCE) at Roma Tre University;
the 2015 International Conference titled “Economic Transition and
Income Inequality in China” at Kyoto University; the Annual Conference
of the Japanese Association for Chinese Economy and Management
Studies, Tokyo; the 2015 6th Biennial International Conference on
Transition and Economic Development (TED) at Fudan University; the
27th CEA (UK) and 8th CEA (Europe) Annual Conference held at the
University of Duisburg-Essen; and the 2016 14th European Association
of Comparative Economic Studies (EACES) Conference at the University
PREFACE ix
of Regensburg, Germany. I would like to express my gratitude to my col-
leagues and friends, Professor Ichiro Iwazaki and Professor Kazuhiro
Kumo, for their helpful suggestions and encouragement for my research,
and colleagues at the Institute of Economic Research (IER), Hitotsubashi
University, for giving me such an excellent research environment and sup-
port. I greatly appreciate the staff at Palgrave Macmillan for their interest
in my research work. Particularly, I acknowledge Dreyer Jacob, Nirmal
Kumar Gnana Prakasam, and Jasper Asir for their encouragement and
editing work.
Finally, I am deeply grateful to my family for their warm and strong
support of my life and work.
Tokyo, Japan Xinxin Ma
May 30, 2018
c
ontents
1 Introduction 1
1.1 B ackground: Economic Transition and Change in Labor
Policies and Labor Market Structures in China 1
1.2 T he Main Arguments of the Book 8
1.3 S ignificance of the Book 14
References 15
Part I Labor Market Reform in China: Consequence and Cause 17
2 Economic Transition and Change of Wage Structure 19
2.1 I ntroduction 19
2.2 I nstitutional Background: Changes in China’s Wage
Policy and Wage System 20
2.3 T he Channels and Empirical Studies on the Influence of
Education on Wage 23
2.3.1 T he Channels of the Influence of Education on
Wage 23
2.3.2 P revious Empirical Studies on the Return to
Education in China 24
2.4 M ethodology and Data for Estimation of Return to
Education 25
2.4.1 M odels 25
2.4.2 D ata 26
xi
xii CoNTENTS
2.5 E stimated Results of Wage Structure 30
2.5.1 R esults of Wage Function at Mean Wage Level 30
2.5.2 R esults of Return to Education by Wage
Percentiles 41
2.6 C onclusions 42
Appendix 43
References 45
3 Determinants of Wage Gap Between Public Sector and
Private Sector 49
3.1 I ntroduction 49
3.2 M ethodology and Data 51
3.2.1 M odels 51
3.2.2 D ata 53
3.3 E conometric Analysis Results 56
3.3.1 H ow Large Are the Wage Gaps Between the
Public Sector and Private Sector? 56
3.3.2 A re There Wage Structure Differences Between
the Public and Private Sectors? 58
3.3.3 W hat Determines the Wage Gaps Between the
Public Sector and Private Sector? 63
3.4 C onclusions 66
References 68
4 Monopoly Industrial Sector and Its Influence on the
Wage Gaps Between Migrants and Local Urban Residents 71
4.1 I ntroduction 71
4.2 H ukou System Reform and Policy Change for
Monopolistic Industries in China 72
4.2.1 H ukou System Deregulation in China 73
4.2.2 M onopolistic Industries in China 74
4.3 T he Channels of the Influence of Industrial Factors on the
Wage Gap: Inter-industry Differentials and Intra-
industry Differentials 75
4.3.1 T he Channels of the Influence of Industry Sector
on the Wage Gap Between Migrants and Local
Urban Residents 75
4.3.2 S ummary of Empirical Studies on the Wage Gap
Between Migrants and Local Urban Residents 78
