Abstract:Pension reform in China mandates employers to contribute significant amounts to employee pension funds. The implementation of pension reform varies in different regions and different times. This paper tries to estimate the impact of this reform on the wage of employees using the data of medium and large manufacturers in China during 2002 and 2007. After controlling the potential endogenous problems, we find that both the nominal wages and real wages of employees were rigid when pension provision changes. The results are robust to various robustness checks. Therefore, there is no trade-off between wage and pension. These findings are of vital importance in guiding the pension policies.