The Political Economy of Labor Employment Decisions: Evidence from China

• 成果类型: Article
• 署名作者: Gu, Zhaoyang; Tang, Song; Wu, Donghui
• 署名单位: Chinese University of Hong Kong; Shanghai University of Finance & Economics; Shanghai University of Finance & Economics
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3345
• 发表日期: 2020
• 页码: 4703-4725
• 关键词: SOES; Political connection; Labor costs; cost stickiness

摘要

In China's transitional economy, one of the major objectives of the government is to maintain social stability. We hypothesize that, through state ownership and appointment of executives, Chinese government officials can influence firms' labor employment decisions by limiting layoffs when firms' sales decline. Consistent with this hypothesis, we find that state-owned enterprises (SOEs) have stickier labor costs than non-SOEs, and the presence of politically connected managers makes labor costs even stickier in SOEs while having little effect in non-SOEs. Such effects are stronger in regions with weak market institutions and during time periods when government officials are to be promoted. We also show that the government reciprocates SOEs' sticky labor policies with subsequent subsidies.