The Political Economy of Labor Employment Decisions: Evidence from China

Zhaoyang Gu (), Song Tang () and Donghui Wu ()
Additional contact information
Zhaoyang Gu: School of Accountancy, The Chinese University of Hong Kong, Hong Kong Special Administration Region, China;
Song Tang: School of Accountancy and the Institute of Accounting and Finance, Shanghai University of Finance and Economics, 200433 Shanghai, China
Donghui Wu: School of Accountancy, The Chinese University of Hong Kong, Hong Kong Special Administration Region, China;

Management Science, 2020, vol. 66, issue 10, 4703-4725

Abstract: In China’s transitional economy, one of the major objectives of the government is to maintain social stability. We hypothesize that, through state ownership and appointment of executives, Chinese government officials can influence firms’ labor employment decisions by limiting layoffs when firms’ sales decline. Consistent with this hypothesis, we find that state-owned enterprises (SOEs) have stickier labor costs than non-SOEs, and the presence of politically connected managers makes labor costs even stickier in SOEs while having little effect in non-SOEs. Such effects are stronger in regions with weak market institutions and during time periods when government officials are to be promoted. We also show that the government reciprocates SOEs’ sticky labor policies with subsequent subsidies.

Keywords: SOEs; political connection; labor costs; cost stickiness (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://doi.org/10.1287/mnsc.2019.3345 (application/pdf)

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:inm:ormnsc:v:66:y:2020:i:10:p:4703-4725

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().