LABOR-MARKET REFORM AND THE CHANGING STRUCTURE OF WAGE DETERMINATION IN CHINA STATE SECTOR DURING THE 1980S

China's market-oriented labor market reform has been in place for abou t one and a half decades. This study uses individual data for 1981 and 1987 to examine the success of the first half of the reform program. Success is evaluated by examining changes in the wage setting structur e in the state-owned sector over the reform period. Have the market re forms stimulated worker incentives by increasing the returns to human capital acquisition? Has the wage structure altered to more closely mi mic that of a market economy? In 1987, there is evidence of a structur al change in the system of wage determination, with slightly increased rates of return to human capital. However, changes in industrial wage differentials appear to play the dominant role. It is argued that thi s may be due to labor market reforms, in particular the introduction o f the profit related bonus scheme. (C) 1997 Academic Press.