{"title":"Labor protection and firms’ risk-taking behavior: evidence from China’s New Labor Contract Law","authors":"Yi Che , Xuchao Li , Yan Zhang , Lin Zhao","doi":"10.1016/j.asieco.2024.101713","DOIUrl":null,"url":null,"abstract":"<div><p>China’s new Labor Contract Law (LCL), which came into force in 2008, has greatly improved the protection of workers and increased the cost of labor. This study employs the cross-sectional variation in labor intensity and time variation before and after the new LCL, to investigate its impact on firms’ risk-taking behavior. The analysis finds strong and robust evidence that the LCL increased the risk-taking of firms in industries with higher labor intensity. The increased risk-taking mainly arose among firms in regions with stricter law enforcement, firms that were less law abiding before the new LCL, as well as non-state-owned firms and efficient firms. The study also identifies two key mechanisms through which the new LCL increased firms’ risk-taking behavior: capital deepening and productivity improvement.</p></div>","PeriodicalId":47583,"journal":{"name":"Journal of Asian Economics","volume":"91 ","pages":"Article 101713"},"PeriodicalIF":2.9000,"publicationDate":"2024-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Asian Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1049007824000083","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
China’s new Labor Contract Law (LCL), which came into force in 2008, has greatly improved the protection of workers and increased the cost of labor. This study employs the cross-sectional variation in labor intensity and time variation before and after the new LCL, to investigate its impact on firms’ risk-taking behavior. The analysis finds strong and robust evidence that the LCL increased the risk-taking of firms in industries with higher labor intensity. The increased risk-taking mainly arose among firms in regions with stricter law enforcement, firms that were less law abiding before the new LCL, as well as non-state-owned firms and efficient firms. The study also identifies two key mechanisms through which the new LCL increased firms’ risk-taking behavior: capital deepening and productivity improvement.
期刊介绍：
The Journal of Asian Economics provides a forum for publication of increasingly growing research in Asian economic studies and a unique forum for continental Asian economic studies with focus on (i) special studies in adaptive innovation paradigms in Asian economic regimes, (ii) studies relative to unique dimensions of Asian economic development paradigm, as they are investigated by researchers, (iii) comparative studies of development paradigms in other developing continents, Latin America and Africa, (iv) the emerging new pattern of comparative advantages between Asian countries and the United States and North America.
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