What does democratic management do in Chinese workplaces? Evidence from matched employer–employee data

Abstract

Democratic management (DM) is an important set of statutory employee participation institutions that goes beyond trade unions in Chinese workplaces; however, its effects on pay and performance are unstudied. Using data from the China Employer–Employee Matched Survey, this study examines how DM is associated with pay and performance levels in China. The study finds that DM is positively associated with workers' hourly wages, fringe benefits, and firms' labour productivity on average, suggesting that it is not merely ‘window-dressing’ as perceived by conventional wisdom. This study also reveals that workplace transparency mediates the relationship between DM and employees' earnings, while the industrial relations climate mediates the relationship between DM and firms' productivity.