Working Paper: NBER ID: w17721
Authors: Wei Chi; Richard B. Freeman; Hongbin Li
Abstract: China's emerging labor market was buffeted by changes in demand and supply and institutional changes in the last two decades. Using the Chinese Urban Household Survey data from 1989 to 2009, our study shows that the market responded with substantial changes in the structure of wages and in employment and types of jobs that workers obtained that mirrors the adjustments found in labor markets in advanced economies. However, the one place where the Chinese labor market appears to diverge from the labor markets in advanced countries is the rapid convergence in earnings and occupational positions of cohorts who entered the job market under more or less favorable conditions. On this dimension, China's labor market seems more flexible than those in other countries. Three related factors may explain this pattern: (1) the rapid growth of China's economy; (2) the high rate of employee turnover; (3) the relative weakness of internal labor markets in China. Bottom line, the Chinese labor market has responded about as well as one could expect to the changes in the demand and supply factors and institutional shocks in this critical period in Chinese economic history.
Keywords: Labor Market; China; Economic Growth; Wage Structure; Cohort Effects
JEL Codes: J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shift from administrative wage determination (J38) | widened wage structure (J31) |
| widened wage structure (J31) | increased educational earnings differentials (I26) |
| widened wage structure (J31) | stabilized educational earnings differentials (I24) |
| widened wage structure (J31) | fell and then rose experience differentials (P27) |
| higher cohort sizes (C92) | reduced earnings (J31) |
| higher cohort sizes (C92) | increased wage dispersion (J31) |
| rising GDP (E20) | impacted wage structure (J31) |
| labor market cycles (J48) | varied employment and wages of young workers (J39) |
| adjustment in labor market (J29) | reflects patterns similar to the U.S. (P17) |
| higher degree of wage flexibility (J39) | cohort effects diminished within three years (C41) |