China's Public Sector Interaction With The Private Sector Wage

Since the reform and opening up, both China's economic system and the labor market have undergone enormous changes, from public-sector dominated to ample with diversified ownership. Along with this economic transformation, wage level and wage determination mechanism of entities of different ownership have changed dramatically. In the past 20 years, China's economic reform has witnessed private enterprises flourish, state-own enterprises restructure and its employees laidoff, which demonstrates that state-own and private enterprises have been going through different mode of development, with labor flows between the two sectors.Scholars generally believe that wage levels of China's public sector and private sector and the wage spillover effect between these two sectors may lead to labor mobility in China, which also serves as the evidence to evaluate the effectiveness of reform of wage system and overall labor market.In the context of China's economic reforms over the past 20 years, this paper uses CHNS (China Nutrition and Health Survey) data and Mincer equation as well as a series of econometric methods to analyze changes in wage level and determination mechanism in different ownership units, while focusing on dividing China's employers into public and private sectors and make empirical research on the wage spillovers effects between them. The first part of this article briefly describes the background and finds little direct study of interaction between public and private sector wages in China. The second part reviews existing relative literature. The third section details the data used in this paper and data processing methods. The fourth part sets up econometric models and reports the results of empirical research. The fifth part discusses detailed mechanism of inter-sector wage spillovers. Part six is the conclusion of this article.Through theoretical analysis and empirical research, the main conclusions of this paper are:(1) Wage level of China's government departments, state-own enterprises and private enterprises have long inter-relations. (2) Prior to 1997, China's private sector wage Granger causes the public sector, that is, China's private sector is the wage leader. After 1997, wages in the public sector becomes the leader. (3) Returns to education in China's public and private sectors have reversed after 1997.