CHINA EVOLVING MANAGERIAL LABOR-MARKET

Recent reforms of Chinese state-owned enterprises strengthened a nasce nt managerial labor market by incorporating incentives suggestive of c ompetitive Western labor markets. Poorly performing firms were more li kely to have a new manager selected by auction, to be required to post a higher security deposit, and to be subject to more frequent review of the manager's contract. Managers could be, and were, fired for poor performance. Managerial pay was linked to the firm's sales and profit s, and reform strengthened the profit link and weakened the sales link . Thus the economic reforms helped develop an improved system of manag erial resource allocation responsive to market forces.