IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/19324.html
   My bibliography  Save this paper

Costly Labor Adjustment: General Equilibrium Effects of China's Employment Regulations

Author

Listed:
  • Russell Cooper
  • Guan Gong
  • Ping Yan

Abstract

This paper studies the employment, productivity and welfare implications of new Chinese labor regulations intended to protect workers' employment conditions. We estimate a general equilibrium model of costly labor adjustment from data prior to the policy. Using the estimated parameters, we study the effects of the interventions. We find that increases in severance payments lead to a sizable increase in firm size, lower aggregate employment, a significant reduction in labor reallocation, an increase in the exit rate and a welfare loss. A policy of credit market liberalization will reduce firm size, increase aggregate employment, increase labor reallocation, wages and welfare. If in place at the time, these frictions would have reduced China's annual growth rate by 1.1 percentage points over the 1998-2007 period.

Suggested Citation

  • Russell Cooper & Guan Gong & Ping Yan, 2013. "Costly Labor Adjustment: General Equilibrium Effects of China's Employment Regulations," NBER Working Papers 19324, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19324
    Note: EFG
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w19324.pdf
    Download Restriction: no

    Citations

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


    Cited by:

    1. repec:eee:ecmode:v:71:y:2018:i:c:p:220-233 is not listed on IDEAS
    2. Florian MAYNERIS & Sandra PONCET & Tao ZHANG, 2014. "The cleansing effect of minimum wages Minimum wages, firm dynamics and aggregate productivity in China," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. You, Jing & Wang, Shaoyang, 2018. "Unemployment duration and job-match quality in urban China: The dynamic impact of 2008 Labor Contract Law," Economic Modelling, Elsevier, vol. 71(C), pages 220-233.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:nbr:nberwo:19324. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.