The evolving pattern of the wage-labor productivity nexus in China: Evidence from manufacturing firm-level data

- The spread between labor productivity and the wage level has been widening over time.
- The positive correlation of wages and labor productivity has weakened.
- The ownership structure of capital, firm size and exports significantly affect the nexus.

By employing a large dataset of nation-wide state-owned and non-state-owned manufacturing enterprises in the period 1998-2007, this paper analyzes the evolving pattern of the correlation and spread between wages and labor productivity in China's manufacturing sector and its influence factors. We find that although a significant positive correlation between wages and labor productivity in manufacturing firms exists, this positive nexus has become weak and loose. We also find that, since the 1990s, the labor productivity of Chinese manufacturing enterprises has gained a much greater growth rate than that of the wage level, and therefore the spread between wages and labor productivity has been widening over time. A variety of factors that have influenced the wage-labor productivity nexus of Chinese manufacturing enterprises are identified and discussed with regression models.