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Labor market dynamics in urban China and the role of the state sector

Shuaizhang Feng and Naijia Guo

Journal of Comparative Economics, 2021, vol. 49, issue 4, 918-932

Abstract: This paper studies the effect of state-owned enterprises (SOEs) on the dynamics of the Chinese urban labor market. Using longitudinally matched monthly panel data, we document very low labor force dynamics in the state sector, which leads to a high long-term unemployment rate. We develop and estimate an equilibrium search and matching model with three differences between the state and non-state sectors: labor productivity, labor adjustment cost, and workers’ bargaining power. Counterfactual analysis shows that, among the three channels, reducing the bargaining power of state sector workers is most effective in reducing unemployment duration and unemployment rate.

Keywords: State sector; Labor market dynamics; Search and matching; China; Long-term unemployment (search for similar items in EconPapers)
JEL-codes: J45 J64 P23 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jce.2021.04.002

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Handle: RePEc:eee:jcecon:v:49:y:2021:i:4:p:918-932