The effect of downstream expansion on upstream employment: Quasi-natural experimental evidence from China’s Accelerated Depreciation Policy

Xiaoxiong Chen, Feng He, Guanchun Liu and Yongwei Ye

Research in International Business and Finance, 2022, vol. 63, issue C

Abstract: Taking China’s Accelerated Depreciation Policy in 2014 as a quasi-natural experiment, we run a difference-in-differences regression to investigate how downstream expansion affects an upstream firm’s hiring decision. We find that an expansion in downstream industries has a significant and positive impact on upstream employment, and this finding continues to hold after accounting for other contemporaneous shocks and is robust to a battery of robustness checks. Our mechanism tests demonstrate that the market size channel rather than the financial constraints channel dominates the positive nexus between downstream expansion and upstream employment. Further, this effect is more pronounced for firms with lighter financial constraints, higher labor intensity and greater policy enforcement. Taken together, our findings suggest that tax policies for specific industries would have a general equilibrium effect on the real economy through production networks.

Keywords: Downstream expansion; Upstream employment; Difference-in-differences estimate; Accelerated Depreciation Policy; China (search for similar items in EconPapers)
JEL-codes: D21 G38 H32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531922001763
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:63:y:2022:i:c:s0275531922001763

DOI: 10.1016/j.ribaf.2022.101790

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().