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The Political Economy of Civil Service Pay in China: A Panel Data Analysis
DOI 10.1007/s41111-016-0023-1 ORI GIN AL ARTICLE
Yu You1 bull; Guang Zhang1
Received: 29 October 2015 / Accepted: 14 March 2016 / Published online: 5 April 2016
。 Fudan University and Springer Science Business Media Singapore 2016
Abstract How does the Chinese government pay its officials in different regions? What determines regional variation in civil service pay? These are important questions for understanding the Chinese government. We argue that regional dif- ference of civil service pay is shaped by both political and economic factors. After review of policy changes in government salaries since the 1950s, we conduct an empirical analysis using a panel of 31 provinces from 1997 to 2008. The results indicate that, fiscal transfers, local and self-raised revenues significantly raise wage levels across provinces under certain conditions of government size. Furthermore, Civil service pay positively correlates with level of regional economic development, and also, according to a certain base, central policy of wage adjustment accelerates the rate of increase in civil service remuneration.
Keywords Civil service pay · Wage policy regulation · Cross-provincial variation · Intergovernmental fiscal relations
Introduction
What determines cross-provincial difference in civil service pay in China? This is an intriguing and important, but systematically unanswered question. In this paper, we attempt to uncover the determinants of the variation in civil service pay across Chinese provinces through panel data. Judging by numbers, civil service pay has been a contributing factor in increasing inequality of regional income since the
amp; Yu You
1 School of Public Affairs, Xiamen University, Xiamen, Fujian, China
opening up of China.1 In 1980, Qinghai, with an average civil servantsrsquo; salary of 1097 yuan, ranked first among all the provinces in civil service pay. This figure, however, was only 42 % higher than Sichuan, which appeared at the bottom of the list. In 1995, the highest civil servantsrsquo; pay on average was 116 % higher than the lowest (9005 yuan in Shanghai compared with 4161 yuan in Guizhou) and the figure rose to 177 % in 2012 (90,622 yuan in Shanghai versus 32,672 yuan in Shanxi).
It is worth pointing out that since civil service pay is fully financed by the statersquo;s fiscal revenue, adjustment are politically and ethically sensitive, evident during the National Peoplersquo;s Congress (NPC) and the Chinese Peoplersquo;s Political Consultative Conference (CPPCC). Besides social impact, change in civil service pay system also affects the morale of civil servants, especially for average wage earners in the public sector who are more likely to live better lives with improved compensation (Wu 2014; Child 1995). Obviously, China is not a singular case. After the 2008 financial crisis, public expenditures turned into an age of austerity (Ortiz and Cummins 2013), and many questioned salary levels of the public sector in different countries, especially Europe, so wages and jobs have been cut or frozen, most frequently by unilateral state decision all over Europe (Glassner 2010).
Although the topic has made ripples in society, it has not received sufficient scholarly attention from the field of public administration. From the beginning of this century, Cooke (2004, 895) comments in a retrospective study that lsquo;lsquo;despite the quantitative and qualitative significance of the public sector in China, insufficient studies have been carried out to advance our knowledge of its pay policy and practice and any changes that may have taken place in the wake of the market economyrsquo;rsquo;. Existing empirical research and policy analysis based on data from qualitative interviews, case studies or statistical yearbooks does offer us some important theoretical perspectives and policy information.2 For instance, Chew (1990a, b) and Cooke (2004) focuses on the state-led reforms in Chinarsquo;s public sector pay, and analyzes these reforms using the materials from her interviews with her friends in the Chinese academia. Wu (2009, 2011) further analyzes the policy reform of government officialsrsquo; wages and its impact from the perspective of centralization and decentralization in China. As for the popular subject of lsquo;lsquo;paying a good salary to reduce corruptionrsquo;rsquo; (Yixin Yanglian), a study by Gong and Wu (2012) demonstrates that high-speed economic growth almost goes hand in hand with serious corruption, and there also exists complicated relationships between the civil service pay system and the construction of a clean government. Chan and Ma (2011)
are interested in whether the civil service sector in China pays its employees well or not. By comparing Chinarsquo;s civil service salary reform with other developing countries, the authors conclude that the wage level is never low in China. In his recent book, Wu (2014) makes a detailed discussion about the process of setting the standard of Chinese civil service pay and in doing so, elucidates the interactions
1 Many studies discuss increasing urban wage inequality in China since 1978. See, for example, Knight and Song (2003), Kanbur and Zhang (lt;
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