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A Study on High Incomes in China’s Monopoly Industries
Yue Ximing and Cai Meng
School of Finance, Renmin University of China, Beijing, China
Abstract: High incomes in state monopoly industries have drawn extensive public
concerns in China. The management of state-owned enterprises (SOEs) is motivated and
empowered to set payment schemes in their own favor, resulting in the greater extent to
which their senior executives are overpaid as compared with average workers. Hence, the
level of unjustified high incomes is heterogeneous among employees of different income
levels in state monopoly industries. Using Machado-Mata counterfactual decomposition
method based on the regression of multiple quantiles, this paper measures the proportions
of reasonable and unreasonable parts of pay gap between state monopoly industries and
competitive industries. Our study found that the workforce of state monopoly industries are
overpaid across various wage levels, while the extent to which they are overpaid increases
with the rise of wage level. The implication is that compared with average workers,
executives in state monopoly industries are overpaid to an even greater extent. This requires
that the government focus on curbing the high executive income in addition to putting a
lid on the gross payroll of SOEs in state monopoly industries. The fundamental strategy to
resolving the excessive high income in state monopoly industries is to bring different types
of SOEs under different corporate management models and income systems.
Keywords：decompositionstate monopoly industries, wage difference, quantile regression, counterfactual
JEL Classification: J31
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