A nonparametric analysis of insufficient wage incentives in the Chinese health industry

ABSTRACT

This study provides empirical results on the insufficient wage incentives in the Chinese health industry, which may result in the poor productivity of high-ability medical personnel. We first propose a signaling game by capturing the progressive wage incentive in this industry. Then, we show that the model primitives are nonparametrically identified and estimable using recently developed methodologies related to measurement errors. Adopting a dataset from the China Household Income Project, we provide empirical evidence of the negative influence of insufficient wage incentives on the productivity of high-ability workers, especially those in higher job positions. As the number of high-ability workers in higher job positions is high, it is important to improve wage incentives in the Chinese health industry, especially for workers in higher job positions, to promote the productivity of high-ability medical workers.

KEYWORDS:

• Incentive wages
• productivity
• Chinese health industry
• ability

JEL CLASSIFICATION:

• C14
• J31
• J24

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ The unknown function $A\left(.\right)$ should be a monotonically increasing function to ensure the existence of the separating equilibrium in the job market signaling game based on Spence (1973).

² We can see that the probability of the highest ability ($a=8$) is low in both the public and the private sectors. The low productivity of workers with the highest ability level may be explained by their low number. However, the probabilities of workers with high ability levels ($a=6,7$) are high in both the public and the private sectors, especially when $a=7$. The low productivity of workers with high ability levels ($a=6,7$) therefore cannot be explained by the small number.