Essays On Efficiency Loss From Labor Misallocation

The competitive environment and company governance mechanism in China's state-owned enterprises has been obviously changed by the mixed economy reform(“hungai”)implemented by the government after 2013.One of the key factors to evaluate this reform is efficiency improvement caused by it.During more than 30 years' reform in wage system,the wage bill in SOEs is mainly determined by demand and supply in labor market,while still partly controlled by the government.The wage control policy on wage bill caused the half-market feature in SOE's wage system,including: 1)To introduce the total floating wage system(TFWS)to rule a total wage bill in each state firms according to its performance.2)To restrict the wage difference within the firm in to a certain extent,and caused the feature of “shared wage system” in SOEs.Based on the perspective of wage determination system in state-owned firms(SOEs),my essay has analyzed the relationship between wage determination reform,labor misallocation and efficiency loss(improvement).According the modeling and numerical analysis in Chapter 3 and 4 in my essay,I find that wage control policy may reduce its incentive effect on an individual's effort and caused the labor misallocation and efficiency loss in state firms.Moreover,the inefficiency state firms will worsen the performance in non-state firms and reduce the efficiency in the whole economy.The study in Chapter 3 aims to incorporate TFWS into a growth model with fair wage to quantitatively assess its effects on the efficient loss in SOEs and the whole economy.The TFWS,including “gongxiao guagou”,“liang diyu” and so on,has been introduced since 1984 and implemented in more than 70% industrial state-owned enterprises by 1996.The constraints came from TFWS resulted in wage rigidity and increased the labor cost in state firms.The calibration version of the model shows that the TFWS accounts for 24.84% and 36.40% of the reduction in state firms' shares of capital and output,separately.The study in Chapter 4 analyzes the impact of the upstream monopoly state firms and the shared wage determination system on the wage difference and efficiency loss.The study finds that the huge profit of SOEs after 2000 mainly result from the monopoly of them.According to the shared wage determination,the huge profit converted to the high wage in monopoly state firms.My analysis indicates that increasing the productivity difference among different kinds of human capital with in each state firm might be an effective solution and reduce the wage difference between state and non-state firms.By realizing the effect of human capital,the aggregate of state firms and the welfare of the whole economy will also increase.Besides,this essay also examines the effect of the mixed economy reform,which allowed non-state-owned capital hold shares in state-owned enterprises.This study in Chapter 5 is based on the view of the job fit mechanism.I try to answer the question that whether the output of SOEs and the whole economy will increase,if the non-state-owned capital increased the job match in state-owned enterprises.The analysis in Chapter 5 shows that the policy of removing entering barriers in state-owned monopoly industries should be implemented along with the improvement of job fit in SOEs.Without leading the non-public capital to increase the job fit in state firms,the entering of non-state firms might not markedly increase the efficiency of state economy and the welfare of the whole economy.Finally,this essay concludes the following policy advices.Increasing the effort of different kind of human capita,and the job fit within firm might be an effective way to improve the efficiency of SOEs.And the effective state-owned economy will also lead the improvement of non-state-owned economy.What is more important is that meanwhile the reform should discourage the government to rule wage control policy and encourage the firm to pay for individuals' performance.As a result,the wage growth will become one driving force to profit growth,rather than one result of profit growth.