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How does entry deregulation affect employment: Evidence from China

Author

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  • Su, Yu
  • Xu, Bin
  • Zeng, Xin

Abstract

Although entry regulations are a common feature across global economies, comprehensive assessments of how such regulations influence firms' employment dynamics and labor market inequality remain limited. This study investigates a novel entry deregulation policy implemented in China between 2016 and 2018, which aimed to streamline pre-approval procedures and reduce implicit barriers to business establishment. Using empirical data from Chinese listed firms, we find a significant causal effect of the policy on employment growth that is attributable to investment expansion and market growth. The effect is more pronounced among established firms, financially unconstrained firms, manufacturing firms, capital-intensive firms, and those operating in regions characterized by higher levels of local protectionism and market fragmentation. Moreover, the policy boosted firms’ demand for low-skilled and production workers. These findings offer policy insights into maximizing the benefits of deregulation to enhance employment and reduce labor market inequality, with important implications for developing countries.

Suggested Citation

  • Su, Yu & Xu, Bin & Zeng, Xin, 2026. "How does entry deregulation affect employment: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 89(C), pages 1-20.
    • Handle: RePEc:eee:ecanpo:v:89:y:2026:i:c:p:1-20
    DOI: 10.1016/j.eap.2025.11.016
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    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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