Labor allocation in China: Implicit taxation of tbe heterogeneous non-state sector

Fariha Kamai, Mary E. Lovely

Research output: Chapter in Book/Entry/PoemChapter


Using China's Annual Survey of Industrial Production, we estimate the marginal revenue product of labor (MRPL) for all state-owned and above-scale non-state manufacturing firms for 2001-2004 and 2004-2007. We find that labor productMty varies systematically within industries by ownership type and thai nonasta1e firms face implicit labor taxation relative to state-owned enterprises (SOE.s). We also find that, in keeping with ongoing reforms of the state sector, ownership differentials fall over time, with gaps between non-eta1e enterprises and SOEs falling by about half over time. Wiltlin the non-state sector, enterprises registered as legal parsons have higher MRPL, on average, than do firms registered as collective or private enterprises. Disaggregating this group using information on equity shares reveals that firms registered as legal persons and majority owned by legal persons have the highest MRPL relative to SOEs. Indeed, these enterprises show significantly higher MRPL than those firms directly controlled by the state. Lega.l-person firms with majority stme ownership have MRPl differentials similar to those for legal-person firms with majority private or majority collective ownership. This evidence is consistent with continuing, albett diminishing, lmpllctl labor subsidies for directly SOEs but not for firms whose shares are owned by the state, sven if those shares are registered to legal pernons.

Original languageEnglish (US)
Title of host publicationInternational Economic Integration and Domestic Performance
PublisherWorld Scientific Publishing Co. Pte Ltd
Number of pages28
ISBN (Electronic)9789813141094
ISBN (Print)9789813141087
StatePublished - Feb 27 2017


  • Labor allocation
  • Labor subsidies
  • Privatization

ASJC Scopus subject areas

  • General Economics, Econometrics and Finance
  • General Business, Management and Accounting


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