Strengthening worker benefits or destroying jobs: Effect of the 2008 Labor Contract Law in China

Chih-Hai Yang

International Review of Law and Economics, 2023, vol. 73, issue C

Abstract: This study examines the effect of strict enforcement of the 2008 Labor Contract Law (LCL) on firm employment in China. Although the LCL caused a substantial increase in labor cost, there are no negative repercussions on employment. By contrast, surviving firms continue to increase employment driven by the strong labor demand of the fast-growing Chinese economy. However, compared with non-exposed firms, exposed firms suffered negative repercussions on employment after the enforcement of LCL. Exposed firms exhibited reduced wages after the LCL relative to non-exposed firms, suggesting that wage has a mediation effect on reducing the insurance expenditures of both employers and employees; they also raised productivity considerably after the LCL to absorb the incremental labor costs and survive in the market. However, there are heterogeneous effects of wage and productivity among firms of various ownerships and exporting behaviors.

Keywords: Labor Contract Law; Employment; Wage; Productivity (search for similar items in EconPapers)
JEL-codes: J23 J32 J41 K31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:73:y:2023:i:c:s0144818822000771

DOI: 10.1016/j.irle.2022.106121

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