PROFIT-SHARING, BONUS PAYMENT, AND PRODUCTIVITY - A CASE-STUDY OF CHINESE STATE-OWNED ENTERPRISES

This paper studies the impact of profit sharing and bonus payment on t he performance of Chinese state industries in the 1980's. Employing th e Kmenta approximation of a CES function and a nonlinear simultaneous system, it is found that over half of value-added growth could be expl ained by bonus incentives. Labor quality was another important factor affecting firm performance. Previous studies that do not consider labo r quality may have produced biased results. The positive effect of bon us payment on production found by others is, however, confirmed. (C) 1 997 Academic Press.