How do land and migration restrictions inhibit the formation of zombie firms? Quasi-natural experimental evidence from China

Chi Zhang, Yong Qi and Shuo Yang

Applied Economics Letters, 2025, vol. 32, issue 14, 2019-2024

Abstract: This paper takes China’s land and migration restrictions (LMRs) on mega cities in 2014 as a quasi-natural experiment. Employing a staggered difference-in-differences (DID) model, the study investigates the impact of LMRs on the formation of zombie firms and explores the underlying mechanisms. The findings reveal that LMRs lead to increased land and labour costs in mega cities. Consequently, firms respond by enhancing management efficiency and increasing R&D innovation, which significantly inhibits firm zombification. Heterogeneity analysis indicates that this inhibitory effect is more pronounced in firms with low financial constraints, those located in high marketization regions, and those without political connections. Furthermore, a detailed analysis demonstrates that LMRs play a role in facilitating the recovery of zombie firms, while not influencing their exit. This nuanced understanding of the relationship between LMRs and the formation of zombie firms contributes valuable insights to the existing literature.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2024.2332524 (text/html)
Access to full text is restricted to subscribers.

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:taf:apeclt:v:32:y:2025:i:14:p:2019-2024

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2024.2332524

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().