Have Chinese firms become smaller? If so, why?

Qiming Yang, Xiaobo Zhang and Wu Zhu

No 1558, IFPRI discussion papers from International Food Policy Research Institute (IFPRI)

Abstract: Normally as an economy develops, firm sizes increase. However, as measured by the employment rate, the firm size in China declined from 2004 to 2008. In this paper, we develop a structural dynamic model with heterogeneous workers to study the relative contributions of three factors to declining firm size: rising real wages, implementation of minimum wages, and the introduction of a new national labor contract law. While rising wages make a sizeable contribution, we find that the new labor law plays a dominant role in solving the puzzle. In comparison, the impact of minimum wages is more muted.

Keywords: law; labour legislation; capacity development; wages; structural dynamics; firm size; China; Asia; Eastern Asia (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cna, nep-dge and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:fpr:ifprid:1558

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