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Labor market matching and unemployment in urban China

Listed author(s):
  • Liu, Yang
Registered author(s):

In the traditional labor supply–demand approach, unemployment usually results from a lack of labor demand or excess of labor supply. However, in urban China, unemployment coexists with a conflicting phenomenon, shortage of workers in firms. In this study, we employ a novel approach to tackle this issue, search and matching theory, the empirical study of which has not drawn much attention in China. Our multiple model consisted of job-worker matching, job creation and destruction, rural–urban immigration and on-the-job search, and unemployment changes in China. We used non-linear estimation and the three-stage least squares analysis in this study. We found that matching efficiency declined greatly during the 1996–2008 period. The econometric model and simulation results indicated four key factors that led to changes in China's unemployment level: matching efficiency, job destruction, productivity growth, and job-search services. Finally, by using our econometric model, we identified the reasons for the shifts in the Beveridge curve.

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File URL: http://www.sciencedirect.com/science/article/pii/S1043951X12001174
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Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 24 (2013)
Issue (Month): C ()
Pages: 108-128

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Handle: RePEc:eee:chieco:v:24:y:2013:i:c:p:108-128
DOI: 10.1016/j.chieco.2012.10.006
Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

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  1. Zhongmin Wu & Shujie Yao, 2006. "On Unemployment Inflow and Outflow in Urban China," Regional Studies, Taylor & Francis Journals, vol. 40(8), pages 811-822.
  2. Diamond, P. A. & Maskin, Eric, 1981. "An equilibrium analysis of search and breach of contract II. A non-steady state example," Journal of Economic Theory, Elsevier, vol. 25(2), pages 165-195, October.
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  8. Liu, Yang, 2012. "Does Internal Immigration Always Lead to Urban Unemployment in Emerging Economies? : A Structural Approach Based on Data from China," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 53(1), pages 85-105, June.
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  15. Sanna-Mari Hynninen, 2009. "Heterogeneity of job seekers in labour market matching," Applied Economics Letters, Taylor & Francis Journals, vol. 16(18), pages 1819-1823.
  16. Meng, Xin & Zhang, Dandan, 2010. "Labour Market Impact of Large Scale Internal Migration on Chinese Urban 'Native' Workers," IZA Discussion Papers 5288, Institute for the Study of Labor (IZA).
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