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The Determinants of China's Minimum Wage Rates

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  • Achim Schmillen
  • Michael Stops
  • Dewen Wang

Abstract

We use a highly disaggregated panel of macro data and minimum wages at the county level to investigate the processes behind minimum wage adjustments in China. Relying on random effects models, spatial econometrics techniques, and multilevel analyses, we document that a comparatively small number of economic variables – including the local price level and GDP per capita – are important determinants of minimum wage rates. Interactions between adjacent counties and counties of the same administrative type, and centralized mechanisms, particularly at the provincial level, also play an important role in explaining the variance in minimum wage rates across counties. Finally, we show that China's provinces are the key players for setting minimum wage rates and that, when they do so, they are not uniform in the way they weigh different economic variables.

Suggested Citation

  • Achim Schmillen & Michael Stops & Dewen Wang, 2023. "The Determinants of China's Minimum Wage Rates," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(3), pages 59-91, May.
    • Handle: RePEc:bla:chinae:v:31:y:2023:i:3:p:59-91
    DOI: 10.1111/cwe.12489
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    References listed on IDEAS

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