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Labor protection policy and firm markup: Evidence from the implementation of the China social insurance law

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  • Yang, Zhiwei
  • Yang, Jiahui
  • Wang, Wei

Abstract

The implementation of China’s Social Insurance Law (SIL) has led to changes in the standardization of social insurance premium collection and administration and the establishment of an important labor protection policy. This study examines the effects of SIL on Chinese firms’ markup. This study employs a difference-in-differences model using China-specific data to analyze the contribution of social insurance premium collection to firm markup following the SIL implementation. Our findings indicate that enhancing managers’ long-term philosophy and optimizing capital allocation contribute to this effect. Furthermore, our heterogeneity analyses reveal that the relationship between SIL and markup is more pronounced among non-state enterprises, central and western regions, and industries with low fiscal pressure. Our findings offer policymakers valuable insights into how labor protection policies influence markups in emerging market countries.

Suggested Citation

  • Yang, Zhiwei & Yang, Jiahui & Wang, Wei, 2025. "Labor protection policy and firm markup: Evidence from the implementation of the China social insurance law," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008827
    DOI: 10.1016/j.frl.2025.107623
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    JEL classification:

    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy

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