The Political Economy of Civil Service Pay in China: A Panel Data Analysis

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 difference 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.