Economic Transition and Wage Gap between Communist Party Members and Nonmembers in China

Using the data from the Chinese Household Income Project Survey, this study investigates the influence of membership in the Communist Party of China (CPC) on wage levels during the 2000s, and the determinants of wage gaps between CPC members and nonmembers. We apply the wage function estimations considering the sample selection bias and use three decomposition methods. Three new findings emerge. First, the probability of joining a CPC organization is higher for a male worker, a well-educated worker, and a worker with parents who are CPC members: there is an inheritance of CPC membership in China. Second, the wage premium of CPC membership differs by models, which indicates that the selection bias may affect the wage premium greatly. Third, the contribution rate of the explained component including human capital on wage gap is larger than that of the unexplained component, and it became larger from 2002 to 2013. When the sample selection bias is addressed, the main factor is the explained part in 2002, while it is the unexplained part in 2013. It is indicated that as the economic transition advanced, discrimination against CPC nonmembers and factors that determine the probability of gaining CPC membership such as the inheritance of CPC membership grew in influence and contributed even further to the expansion of the wage gap.

Forthcoming: Ma, Xinxin. "Political background and its influences on wage gaps: Evidence from China," Journal of the Asia Pacific Economy.