Year of Publication

2010

Degree Name

Doctor of Philosophy (PhD)

Document Type

Dissertation

College

Business and Economics

Department

Economics

First Advisor

Dr. John Garen

Second Advisor

Dr. Chris Bollinger

Abstract

Over the past three decades, economic reforms have brought about dramatic changes in China. The wave of structural and economic reforms regarding the State-owned Sector (SOS), and the surge of the Non-State-owned Sector (NSOS), have influenced returns in the labor market, such as the returns concerning human capital and political capital in urban China. Presumably, the NSOS would be more marketed-oriented compared to the SOS, and it would have different returns concerning political capital, as represented by Chinese Communist Party (CCP) membership. This is likely because the NSOS would not value Party membership as much as the SOS does. The question of how Party membership is rewarded in the two sectors might also change with the development of the two ownership sectors, as more time passes since the establishment of the economic reforms.

I examine whether CCP members display any earnings advantage in these two sectors, and I also explore how such an advantage might have changed over time. Unlike most of the previous studies that have focused on earnings in urban China, I treat Party membership affiliation and ownership sector selection as being endogeneous. I apply the Mlogit -OLS two-stage selection correction estimation proposed by Lee (1983) and discover evidence which suggests that Party membership serves as a proxy for both political and productive skills. A flat Party premium in the SOS and a decreasing Party premium in the NSOS suggest that the Party card served a similar function in the payment scheme present in the SOS during this three year span, whereas the NSOS valued political capital by a decreasing amount over time.

The evidence presented in my dissertation indicates that economic reforms tend to mitigate the earning advantage of Party members that occurs as a result of unequal treatment based on Party membership. This evidence suggests that CCP membership is losing its earning power, at least in the NSOS. In addition, the CCP members sacrifice the benefits previously possessed in the adaptation to the transformed economic environment in urban China. However, the rewards to other forms of human capital have increased over time.

Included in

Economics Commons

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