The Effect Of Industrial Monopolies On Wages

During the economic reform ear in china, inter-Industry wage differential began toemerge. Moreover, the inter-industry wage differential, particularly, the wage gapbetween monopoly sector and competition sector, have been enlarged in recent years.Since the inter-industry wage differential may lead to unfair in income distribution,various circles in the society offer extensive concern and discussion on this topic.The purpose of this dissertation is to investigate the effect of industrial monopolieson employee wage rates. We first describe China’s institution background of employeewage policies and review prior literature. Then, using the1348unique listed firms and8675firm-year observations during the period from2002to2009, we identify industrialmonopolies according to two methods. The first is to judge subjective some industriesas industrial monopolies based on prior studies. The second is to classify objectivelysome industries as industrial monopolies according to mean value and standarddeviation of industries’ marginal profit. After that, the dissertation studies three relatedquestions: the effect of industrial monopolies on employee wage; the effect of industrialmonopolies on incentive consequence of employee wage; and the effect of industrialmonopolies on inside wage distribution.We find wage rates in monopoly industries are higher than those in other industries,and this inter-industry wage differential has gradually widened in our sample period.After controlling the effect of firm size, leverage, firm performance, other firmcharacteristics, and region-and year-fixed effect, the employee wage in monopolyindustries is higher47percents than that in competition industries. Moreover, ourevidence shows that high wage rates in monopoly industries do not improve the firmperformance, suggesting higher wages should be unreasonable. The paper also finds thatwage differential between the top executives and the employees is lower in monopolyindustries than other industries. This study adds to our understanding of the currentcharacteristics and their causes of wages in monopoly industries.