The State-owned Economy,Political Equilibrium and Wage Gap between the Monopolistic Sector and the Competitive Sector

The wage gap between the monopolistic sector and the competitive sector has begun to widen since 1998.The article will explain it from the political economy perspective.There are a large amount of the SOEs in the monopolistic sector and the competitive sector before 1998.The government restricted the pricing power of the monopolistic sector to keep the balance between two sectors.After most of SOEs retreated from the competitive sector after 1998,however,the government relaxed the pricing power of the monopolistic sector because it only considered the latter's interest.If only the product price of the monopolistic sector is higher than the marginal cost,the wage gap between the two sectors will widen as the proportion of the competitive sector in the whole economy increases.The empirical model shows that the relationship exists only after 1998.