Structural monetary policy, corporate behavior, and pay gap: Evidence from SMEs in China

Based on the implementation of a series of structural monetary policies for small and micro enterprises (SMEs), this study examines the impact of these policies on the pay gap between SMEs and large enterprises (including medium-sized enterprises) and their generation mechanisms. The study finds policy implementation can enable SMEs to achieve higher employee salary growth. In addition, SMEs tend to increase current output, reserve future inventories, and prefer liquidity needs has suppressed the growth of relative wages. On the contrary, SMEs with expanded financial investment, increased R&D investment, increased long-term borrowing and higher retained earnings have increased relative wages. • Innovative Structural Monetary Policy for SMEs implemented by the People's Bank of China. • Combination of quantity supply and price concessions to support SMEs. • Policy measures include targeted lowering of deposit reserve ratios and incentives for credit extension. • Initiatives to promote inclusive finance sectors and alleviate financial burden for SMEs. • Ongoing support demonstrated through consistent issuance of notices and policies.