The purpose of this paper is to explain the relationship between economic performance and labour manoeuvrability of township-village enterprises in the Jiangsu province, China. We start with a general overview of the development in the Chinese economy and the functioning of labour markets. Next, we perform a statistical analysis on economic performance and labour market behaviour based on a sample of 103 enterprises. The flexibility to fire employees turns out to have a considerable impact on growth in added value of the enterprises, whereas hiring flexibility appears to have negligible effects.
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