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The Research of China’s Wage Formation Mechanism since the Reform and Opening-up
Supported by National Natural Science Fund
Date:2012-04-11       From:China Center for Economic Studies, Fudan University Liu Xiaofeng Finishing

was mainly due to the changes in statistical caliber. At the same time, the labor income share differs a lot between regions, but the difference is narrowing over time, which is closely related to the change of industrial structure and its labor income share. FDI, economic development level and the degree of privatization are important factors that affect the labor income share. FDI plays a role mainly through the inter-regional competition, that is, the entrance of FDI weakens the bargaining power of the local labor force. There is a U-shaped curve relationship between the level of economic development and labor income share, and China is still in the decline stage of the U-shaped curve. The increase of privatization also reduce the degree of labor income share, which is not only because that the "profit wage erosion profit " phenomena gradually disappear, but also because the Labour market reforms bring the positive impact on supply.


By estimating the random frontier production function for industrial sectors, as well as the decomposition of TFP growth, the research group further found that the inter-industrial resource reallocation  caused by the industrial restructuring have played a critical role in promoting China's industrial productivity and even the industrial growth during the reform and opening-up. The reform of Chinese resource market and adjustment of industrial structure dominated the overall trend of the resource allocation efficiency, and resulted in the significant efficiency differences within different industries.


Based on the review of the evolutionary history of China’s wage system, the research group investigated the impact of the wage system reform on the level of staff wages, especially the impact of collective wage negotiation system. The study found that the positive impact of collective wage agreement on wage levels was significantly higher in state-owned enterprises than in the other ownership enterprises, and the labor union, as a necessary organization in collective wage negotiation, plays an important role. And compared to ordinary staff, it has a more significant impact on staff wages.


With the income gap decomposition method based on the regression equation, the group found that, during 1988, 1995 and 2002, income inequality between different industries has contributed more and more to the income gap within urban residents in China, and this is mainly due to the rapid increase of income in some

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