Costly Labor Adjustment: General Equilibrium Effects of China's Employment Regulations / Russell Cooper, Guan Gong, Ping Yan.

Format:

Book

Author/Creator:

Cooper, Russell.

Contributor:

National Bureau of Economic Research.

Gong, Guan.

Yan, Ping.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19324.

NBER working paper series no. w19324

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Costly Labor Adjustment

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

This paper studies the employment, productivity and welfare implications of new Chinese labor regulations intended to protect workers' employment conditions. We estimate a general equilibrium model of costly labor adjustment from data prior to the policy. Using the estimated parameters, we study the effects of the interventions. We find that increases in severance payments lead to a sizable increase in firm size, lower aggregate employment, a significant reduction in labor reallocation, an increase in the exit rate and a welfare loss. A policy of credit market liberalization will reduce firm size, increase aggregate employment, increase labor reallocation, wages and welfare. If in place at the time, these frictions would have reduced China's annual growth rate by 1.1 percentage points over the 1998-2007 period.

Notes:

Print version record

August 2013.