Labor mobility and corporate investment—Evidence from a Quasi-natural experiment in China

Ziqi Wu, Yi Xiao and Jian Zhang

International Review of Economics & Finance, 2022, vol. 80, issue C, 1110-1129

Abstract: This paper studies how labor supply affects corporate investment by exploiting an exogenous policy relaxation of urban household registration (hukou) in China. We find that following the staggered hukou policy change, low-skilled labor inflow leads to an increase in the capital expenditure of local firms, consistent with the complementarity hypothesis of low-skilled labor and physical capital. The results are stronger for firms that are less automated and more labor intensive and for regions with lower household income. Our findings suggest that labor mobility induced by labor market friction reduction stimulates corporate investments.

Keywords: Investment; Low-skilled labor; Immigration; Capital-skill complementarity (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:80:y:2022:i:c:p:1110-1129

DOI: 10.1016/j.iref.2022.04.001

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