Enterprise Ownership Reform and Wage Gaps Between Public and Private Sectors

Abstract

AbstractUsing the selection bias correction model and decomposition methods, this study investigates the changes in wage structure and determinants of the wage gaps between the public and private sectors from 2002 to 2018 in China. The major conclusions are as follows. First, the wage gap between the public and private sectors narrowed from 2002 to 2018. The wage gap was wider for the low-wage group than for the middle- and high-wage groups in both 2002 and 2018. Second, when wage gaps were decomposed into explained and unexplained components, the former increased greatly, while the latter decreased from 2002 to 2018, which suggests that the difference in endowment is the main factor in the wage gap. In terms of human capital, both differences in human capital endowment and return to human capital widen the wage gap; their effects increased from 2002 to 2018, and the influence of differences in return to human capital increased greatly. The results demonstrate that the influence of market mechanisms on wage determination has become larger, and the human capital level has become higher in the public sector during the economic transition period.KeywordsPublic sectorPrivate sectorWage gapDecompositionChina