Empirical Analysis On The Wage Gap Between Domestic And Foreign Enterprises

With the development of economic system transformation in our country, the impact of foreign direct investment from different latitude on the wage gap is undergoing profound changes. The wage gap between domestic enterprises and foreign enterprises is an important part of the wage gap in China’s labor market, and increasingly becomes the focus of academic attention. We observed that, in the background of the speedy marketization, the wage gap presented a decreasing trend. The research purpose of this article is to study the trend and to decompose the factors composing the trend, and on this basis, to provide some useful policy suggestions for the future development of our country.First, this paper organizes theories from various literatures, and selects the theories of human capital and labor market segmentation to carry on detailed analysis of the pay gap between foreign and domestic enterprises. Due to the institutional advantages in the public sector and preferential policies for the foreign enterprises, labor market in China forms the two levels of market segmentation. The effects of these two kinds of segmentation mix, and the impacts of the human capital factors on the wage gap are distorted by the segmentation effect. The Oaxaca-Blinder decomposition theory suggests that distinguishing the two factors in the wage gap can contribute to a deeper understanding of the wage gap.Then, this paper uses the employment and income data of urban residents in CHIP-2002、CHIP-2007 and CHIP-2009 to classify ownership types of domestic enterprises, and to carry on the statistical analysis of the wages and wage gap between foreign enterprises and domestic enterprises of all types. It is found that wages from all types of enterprises are in convergence; the wage gaps between foreign enterprises and domestic enterprises of all types are narrowing down. The trend analysis of the subdivisional wages and hourly wage shows that the segmentations in labor market are weakened, but the degree is different for domestic enterprises of different ownerships.In order to further explore the changing trend of the wage gap compositions within the frameworks of human capital theory and market segmentation theory, this article adopts the Oaxaca-Blinder decomposition method which will be adjusted by Lee’s model for selection bias correction of multiple groups. The results show that in the wage gap between the foreign enterprise and the public sector (including government departments, state-owned enterprises and stated collective enterprises), the weight of the part that human capital factors can explain is increasing, and the impact of the market segmentation on the wage gap in the labor market is weakened. This indicates that China’s economic system reform has achieved certain results. But the affect of market segmentation in the wage gap between foreign enterprise and private enterprises is not eased due to the continual existence of preferential policies for foreign enterprises.