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Labor market dynamics in urban China and the role of the state sector

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  • Feng, Shuaizhang
  • Guo, Naijia

Abstract

This paper studies the effect of state-owned enterprises (SOEs) on the dynamics of the Chinese urban labor market. Using longitudinally matched monthly panel data, we document very low labor force dynamics in the state sector, which leads to a high long-term unemployment rate. We develop and estimate an equilibrium search and matching model with three differences between the state and non-state sectors: labor productivity, labor adjustment cost, and workers’ bargaining power. Counterfactual analysis shows that, among the three channels, reducing the bargaining power of state sector workers is most effective in reducing unemployment duration and unemployment rate.

Suggested Citation

  • Feng, Shuaizhang & Guo, Naijia, 2021. "Labor market dynamics in urban China and the role of the state sector," Journal of Comparative Economics, Elsevier, vol. 49(4), pages 918-932.
    • Handle: RePEc:eee:jcecon:v:49:y:2021:i:4:p:918-932
    DOI: 10.1016/j.jce.2021.04.002
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    2. Chassamboulli, Andri & Gomes, Pedro, 2023. "Public-sector employment, wages and education decisions," Labour Economics, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    State sector; Labor market dynamics; Search and matching; China; Long-term unemployment;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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