Performance Pay in China: Gender Aspects Lin Xiu and Morley Gunderson Abstract We provide an in-depth analysis of gender differences in performance pay in China based on a unique dataset — the Life Histories and Social Change in Contemporary China — that provides information on the different components of pay including performance pay and base pay as well as a wide array of pay determining characteristic. The share of performance pay is documented and its determinants, including gender, analysed. Particular attention is paid to gender differences in the different dimensions of performance pay: the probability of receiving it; the magnitude conditional upon receiving it; and their product being the overall unconditional magnitude. Gender differences in these dimensions are decomposed into components due to male–female differences in the endowments of characteristics that explain these dimensions of pay, and gender differences that arise even when men and women have the same endowments of such characteristics with the later component, often taken to reflect discrimination. 1. Introduction Performance pay in general has increased in importance as a form of compen- sation for a variety of interrelated reasons: skill-biased technological change has increased the premium on performance related skills (Lemieux et al. 2009); it can foster innovation that is increasingly important in the knowledge economy (Anderson et al. 2009); new information technologies have facili- tated the measurement of individual performance (Shaw 2009); the survival of firms under global competition depends upon firm performance, and perfor- mance pay has been shown to have positive effects on individual and firm performance (examples of recent evidence include in Boning et al. 2007; Dohmen and Falk 2011; Jones et al. 2010; and Pekkarinen and Riddell 2008). Performance pay in China is of relevance to this literature and of increas- ing policy and practical importance as China moves towards a more market oriented economy with incentives playing a larger role. In the earlier period Lin Xiu is at the University of Minnesota, Duluth. Morley Gunderson is at the University of Toronto. British Journal of Industrial Relations doi: 10.1111/j.1467-8543.2011.00887.x 51:1 March 2013 0007–1080 pp. 124–147 © Blackwell Publishing Ltd/London School of Economics 2011. Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.