China: Labor Market Fundamentals Predict Stagnation

I recently wrote a research paper on China’s labor market, and how the structure and distribution of firms as well as wage effects  might be helpful in forecasting the nation’s growth trajectory.

The study uses a mix of theoretical frameworks and empirical research to construct conclusions. The data comes from the World Bank Enterprise Survey series, with a data set from 2003 and one from 2012.

My conclusion: China is moving in the right direction, but partial and inefficient privatization has blocked the labor market from fully blossoming.

Some key takeaways:

  • Most developed countries witness a concentration of employment in large firms, while the number of small firms declines. China has experienced a significant decline in small firms, but it has not seen a significant increase in employment share inequality.
  • China has a negative firm size wage in 2012 and in 2003. This means that larger firms actually pay lower wages all else equal. This persists even with education and market share controls.
  • The firm size wage effect varies greatly across industries.
  • The negative firm size wage effect has become less negative over time.

To read the full paper and to view the graphs and tables, check out the PDF:

Full Paper

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