IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0268287.html
   My bibliography  Save this article

Can rising labor costs boost private sector R&D investment? : Evidence from a survey of Chinese private firms

Author

Listed:
  • Chuyao Deng
  • Yang Liu
  • Doudou Gu

Abstract

This paper constructs a double difference model (DID) based on the China Private Enterprise Survey (CPES) data over the period 1995–2019, combined with the 2005 national census data and considering the policy shock of the implementation of the Chinese government’s Minimum Wage Regulation in March 2004, to investigate whether rising labor costs promote private firms’ innovation investment. Robustness tests are conducted using placebo tests and event study methods. The study finds that (1) rising labor costs significantly increase private firms’ R&D investment and that this effect has significant lag and cumulative effects; (2) private industrial firms (especially above-scale private industrial firms) are more affected by rising labor costs than other private firms and have more incentives to increase innovation investment; and (3) innovation investment of below-scale private industrial firms is not significantly affected by rising labor costs.

Suggested Citation

  • Chuyao Deng & Yang Liu & Doudou Gu, 2022. "Can rising labor costs boost private sector R&D investment? : Evidence from a survey of Chinese private firms," PLOS ONE, Public Library of Science, vol. 17(8), pages 1-20, August.
    • Handle: RePEc:plo:pone00:0268287
    DOI: 10.1371/journal.pone.0268287
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0268287
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0268287&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0268287?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Li, Su-Fang & Zhu, Hui-Ming & Yu, Keming, 2012. "Oil prices and stock market in China: A sector analysis using panel cointegration with multiple breaks," Energy Economics, Elsevier, vol. 34(6), pages 1951-1958.
    2. Zwick, Thomas, 2011. "Seniority wages and establishment characteristics," Labour Economics, Elsevier, vol. 18(6), pages 853-861.
    3. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    4. Dennis Tao Yang & Vivian Weijia Chen & Ryan Monarch, 2010. "Rising Wages: Has China Lost Its Global Labor Advantage?," Pacific Economic Review, Wiley Blackwell, vol. 15(4), pages 482-504, October.
    5. Li, Ke & Lin, Boqiang, 2016. "Impact of energy technology patents in China: Evidence from a panel cointegration and error correction model," Energy Policy, Elsevier, vol. 89(C), pages 214-223.
    6. Morten Henningsen & Torbjørn Hægeland & Jarle Møen, 2015. "Estimating the additionality of R&D subsidies using proposal evaluation data to control for research intentions," The Journal of Technology Transfer, Springer, vol. 40(2), pages 227-251, April.
    7. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163, Elsevier.
    8. Zhang, Mao & Wang, Yiming & Zhao, Qifeng, 2020. "Does participating in the standards-setting process promote innovation? Evidence from China," China Economic Review, Elsevier, vol. 63(C).
    9. Morales Sarriera, Javier & Salvucci, Frederick P. & Zhao, Jinhua, 2018. "Worse than Baumol's disease: The implications of labor productivity, contracting out, and unionization on transit operation costs," Transport Policy, Elsevier, vol. 61(C), pages 10-16.
    10. Amable, Bruno & Chatelain, Jean-Bernard, 2001. "Can financial infrastructures foster economic development?," Journal of Development Economics, Elsevier, vol. 64(2), pages 481-498, April.
    11. Hottenrott, Hanna & Lopes-Bento, Cindy, 2014. "(International) R&D collaboration and SMEs: The effectiveness of targeted public R&D support schemes," Research Policy, Elsevier, vol. 43(6), pages 1055-1066.
    12. Trindade, Vitor, 2005. "The big push, industrialization and international trade: The role of exports," Journal of Development Economics, Elsevier, vol. 78(1), pages 22-48, October.
    13. Allen, Robert C., 2009. "Engels' pause: Technical change, capital accumulation, and inequality in the british industrial revolution," Explorations in Economic History, Elsevier, vol. 46(4), pages 418-435, October.
    14. J. R. Hicks, 1963. "The Theory of Wages," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-00189-7, May.
    15. Ghiglino, Christian & Venditti, Alain, 2007. "Wealth inequality, preference heterogeneity and macroeconomic volatility in two-sector economies," Journal of Economic Theory, Elsevier, vol. 135(1), pages 414-441, July.
    16. Michele Campolieti & Morley Gunderson & Byron Lee, 2012. "The (Non) Impact of Minimum Wages on Poverty: Regression and Simulation Evidence for Canada," Journal of Labor Research, Springer, vol. 33(3), pages 287-302, September.
    17. Timo Mitze & Torben Schmidt, 2015. "Internal migration, regional labor markets and the role of agglomeration economies," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(1), pages 61-101, October.
    18. You, Kefei & Sarantis, Nicholas, 2012. "Structural breaks and the equilibrium real effective exchange rate of China: A NATREX approach," China Economic Review, Elsevier, vol. 23(4), pages 1146-1163.
    19. Santos, João & Domingos, Tiago & Sousa, Tânia & St. Aubyn, Miguel, 2018. "Useful Exergy Is Key in Obtaining Plausible Aggregate Production Functions and Recognizing the Role of Energy in Economic Growth: Portugal 1960–2009," Ecological Economics, Elsevier, vol. 148(C), pages 103-120.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Songling Wu & Yanqi Si & Xiaoxiang Wang, 2025. "Navigating technological innovation and rising costs: Assessing economic performance in Chinese manufacturing," PLOS ONE, Public Library of Science, vol. 20(1), pages 1-18, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michel Dumont, 2015. "Working Paper 05-15 - Evaluation of federal tax incentives for private R&D in Belgium: An update," Working Papers 1505, Federal Planning Bureau, Belgium.
    2. Young Cheol Jung & Adian McFarlane & Anupam Das, 2021. "The effect of minimum wages on consumption in Canada," The Economic and Labour Relations Review, , vol. 32(1), pages 65-89, March.
    3. Stehnken, Thomas & Schöfl, Isabel & Danneil, Thomas & Astor, Michael & Rammer, Christian & Peters, Bettina & Ehrlich, Alexander & Kraft, Kornelius, 2024. "Evaluation des "Zentralen Innovationsprogramms Mittelstand" (ZIM): Endbericht," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 300894, February.
    4. Thomas H. W. Ziesemer, 2021. "The Effects of R&D Subsidies and Publicly Performed R&D on Business R&D: A Survey," Hacienda Pública Española / Review of Public Economics, IEF, vol. 236(1), pages 171-205, March.
    5. Mehdi Senouci, 2014. "The endogenous direction of technological change in a discrete-time Ramsey model," Working Papers hal-01206029, HAL.
    6. Backhaus, Teresa & Müller, Kai-Uwe, 2019. "Does the German minimum wage benefit low income households?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203585, Verein für Socialpolitik / German Economic Association.
    7. Belton M. Fleisher & William H. McGuire & Xiaojun Wang & Min Qiang Zhao, 2021. "Induced innovation: evidence from China’s secondary industry," Applied Economics, Taylor & Francis Journals, vol. 53(52), pages 6075-6093, November.
    8. Donal O'Neill & Brian Nolan & James Williams, 2002. "Evaluating the Impact of a National Minimum Wage: Evidence from a New Survey of Firms in Ireland:," Economics Department Working Paper Series n1170902.pdf, Department of Economics, National University of Ireland - Maynooth.
    9. Teresa Backhaus & Kai-Uwe Müller, 2019. "Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects," Discussion Papers of DIW Berlin 1805, DIW Berlin, German Institute for Economic Research.
    10. Kapelyuk Sergey, 2014. "Impact of minimum wage on income distribution and poverty in Russia," EERC Working Paper Series 14/03e, EERC Research Network, Russia and CIS.
    11. Schreiner, Lena & Madlener, Reinhard, 2022. "Investing in power grid infrastructure as a flexibility option: A DSGE assessment for Germany," Energy Economics, Elsevier, vol. 107(C).
    12. Scott Rozelle & Yiran Xia & Dimitris Friesen & Bronson Vanderjack & Nourya Cohen, 2020. "Moving Beyond Lewis: Employment and Wage Trends in China’s High- and Low-Skilled Industries and the Emergence of an Era of Polarization," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(4), pages 555-589, December.
    13. Zsófia L. Bárány, 2016. "The Minimum Wage and Inequality: The Effects of Education and Technology," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 237-274.
    14. Christine Mayrhuber & Christian Glocker & Thomas Horvath & Silvia Rocha-Akis, 2015. "Entwicklung und Verteilung der Einkommen in Österreich," WIFO Studies, WIFO, number 50897.
    15. David Fairris & Gurleen Popli & Eduardo Zepeda, 2008. "Minimum Wages and the Wage Structure in Mexico," Review of Social Economy, Taylor & Francis Journals, vol. 66(2), pages 181-208.
    16. Kabeer Bora, 2023. "The Drain Gain: An investigation into how colonial drain helped keep British economy buoyant," Working Paper Series, Department of Economics, University of Utah 2023_01, University of Utah, Department of Economics.
    17. Davcik, Nebojsa S. & Cardinali, Silvio & Sharma, Piyush & Cedrola, Elena, 2021. "Exploring the role of international R&D activities in the impact of technological and marketing capabilities on SMEs’ performance," Journal of Business Research, Elsevier, vol. 128(C), pages 650-660.
    18. James Foreman-Peck & Peng Zhou, 2021. "Fertility versus productivity: a model of growth with evolutionary equilibria," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(3), pages 1073-1104, July.
    19. Benoît Lyrette & Paul-Martel Roy, 1992. "Le régime des décrets favorise-t-il la paix industrielle? L'expérience des activités manufacturières québécoises, 1980-1988," Canadian Public Policy, University of Toronto Press, vol. 18(3), pages 261-274, September.
    20. Haiwen Zhou, 2013. "The Choice of Technology and Rural-Urban Migration in Economic Development," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 8(3), pages 337-361, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0268287. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.