1 Labor Compensation, Productivity and Unit Labor Cost in Chinese Provinces1

Board) for their help and participation in this project. We also kindly acknowledge the National Bureau of Statistics for providing advice as well as unpublished estimates from the First Economic Census for 2004. 2 This paper shows comparisons of relative levels of productivity, labor compensation and unit labor cost by manufacturing industry and province in China. The study is based on a 3-dimensional panel (benchmark years 1995 and 2004, 28 industries and 30 provinces) which makes use of data from the First Economic Census for 2004, covering enterprises of designated size and above (well over 50 % of total manufacturing employment in China), and China’s Third Industrial Census for 1995, covering enterprises at township level and above. The paper first provides a descriptive analysis of the distribution of productivity, unit labor cost and productivity in manufacturing. It shows that the faster growth in productivity relative to labor compensation at the aggregate level has led unit labor cost to decline significantly for all provinces. It also finds that there has been a stron