Efficiency wages and work incentives in urban and rural China

This paper examines incentive-wage effects for production and for managerial/technical workers in both urban and rural Chinese nonagricultural enterprises. We report strong evidence of productivity-enhancing wage behavior among enterprises in all ownership Categories. There is also evidence that firms paying higher efficiency wages experience less shirking among their employees, We find that the profit-maximizing potential of incentive-wage setting is not fully exploited, although there is weak evidence that joint ventures come closer to profit-maximizing behavior at this margin of wage/employment behavior than do collectives or state-owned enterprises. J. Comp. Econ., December 2001, 29(4), pp. 645661 The Ohio State University, 1945 North High St., Columbus, OH 432 10 and University of Hawaii at Manoa, Honolulu, Hawaii 96822. (C) 2001 Elsevier Science.