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Urban Shrinkage and Labor Investment Efficiency: Evidence from China

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  • Hongru Fang

    (School of Economics and Management, Beijing Jiaotong University, Beijing 100082, China)

  • Ran Li

    (School of Economics and Management, Beijing Jiaotong University, Beijing 100082, China)

  • Wenxing Li

    (School of Economics and Management, Beijing Jiaotong University, Beijing 100082, China)

Abstract

In the context of unsustainable urban growth patterns and employment difficulties, we examine the impact of urban shrinkage on labor investment efficiency by drawing on the idea of the difference-in-difference model. Using a sample of Chinese firms from 2010 to 2019, our findings suggest that the widespread occurrence of urban shrinkage in China was responsible for a significant portion of the excessive labor investment in most listed companies. These results are robust to alternative specifications. In addition, we further found heterogeneity in the impact of urban shrinkage on labor investment efficiency. For state-owned or mature listed companies, this impact is manifested as the promotion of employment redundancy, while for non-state-owned or young companies, the impact is reflected in alleviating insufficient employment. Thus, we creatively identify a potential channel through which imbalanced development between cities affects corporate and economic sustainability.

Suggested Citation

  • Hongru Fang & Ran Li & Wenxing Li, 2023. "Urban Shrinkage and Labor Investment Efficiency: Evidence from China," Sustainability, MDPI, vol. 15(13), pages 1-20, July.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:13:p:10738-:d:1189366
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    References listed on IDEAS

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