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Conference Paper/Proceeding/Abstract 243 views

Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China

Ran Xu, Guanmin Liao, Pengfei Gao Orcid Logo

Finance and Economics PCR Conference, Renmin University of China, Beijing, China (2025)

Swansea University Author: Pengfei Gao Orcid Logo

Abstract

This paper examines the impact of labor dispatch regulation on firm productivity in China. Labor dispatch, a form of indirect employment widely used to reduce labor costs and increase flexibility, expanded rapidly following the 2008 Labor Contract Law, often resulting in unequal treatment of workers...

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Published in: Finance and Economics PCR Conference, Renmin University of China, Beijing, China (2025)
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URI: https://cronfa.swan.ac.uk/Record/cronfa70720
first_indexed 2025-10-18T14:24:03Z
last_indexed 2025-12-05T18:10:24Z
id cronfa70720
recordtype SURis
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spelling 2025-12-04T09:09:17.6533679 v2 70720 2025-10-18 Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China bd00b4a498e1c45d25e0fcdab1838b26 0009-0008-7818-1231 Pengfei Gao Pengfei Gao true false 2025-10-18 CBAE This paper examines the impact of labor dispatch regulation on firm productivity in China. Labor dispatch, a form of indirect employment widely used to reduce labor costs and increase flexibility, expanded rapidly following the 2008 Labor Contract Law, often resulting in unequal treatment of workers and a dual labor market. In response, the Chinese government implemented the 2014 Interim Provisions on Labor Dispatch (IPLD). Using a panel of Chinese A-share listed firms from 2008 to 2019 and applying a difference-in-differences design, we exploit variation in firms’ labor intensity to identify the effects of the regulation. The results show that restricting labor dispatch significantly increases total factor productivity (TFP). Mechanism analysis indicates that productivity gains are driven by workforce upgrading, capital-labor substitution, and increased innovation. Moreover, the regulation improves employee compensation, reduces pay inequality, and enhances firm-specific corporate social responsibility performance. Our findings provide novel evidence that well-designed labor regulations can simultaneously promote efficiency and equity, contributing to high-quality and inclusive economic growth in emerging economies. Conference Paper/Proceeding/Abstract Finance and Economics PCR Conference, Renmin University of China, Beijing, China (2025) 0 0 0 0001-01-01 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University Other 2025-12-04T09:09:17.6533679 2025-10-18T15:20:36.0630712 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Ran Xu 1 Guanmin Liao 2 Pengfei Gao 0009-0008-7818-1231 3
title Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China
spellingShingle Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China
Pengfei Gao
title_short Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China
title_full Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China
title_fullStr Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China
title_full_unstemmed Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China
title_sort Firm Response to an Employment Regulation: Evidence from a Natural Experiment in China
author_id_str_mv bd00b4a498e1c45d25e0fcdab1838b26
author_id_fullname_str_mv bd00b4a498e1c45d25e0fcdab1838b26_***_Pengfei Gao
author Pengfei Gao
author2 Ran Xu
Guanmin Liao
Pengfei Gao
format Conference Paper/Proceeding/Abstract
container_title Finance and Economics PCR Conference, Renmin University of China, Beijing, China (2025)
institution Swansea University
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 0
active_str 0
description This paper examines the impact of labor dispatch regulation on firm productivity in China. Labor dispatch, a form of indirect employment widely used to reduce labor costs and increase flexibility, expanded rapidly following the 2008 Labor Contract Law, often resulting in unequal treatment of workers and a dual labor market. In response, the Chinese government implemented the 2014 Interim Provisions on Labor Dispatch (IPLD). Using a panel of Chinese A-share listed firms from 2008 to 2019 and applying a difference-in-differences design, we exploit variation in firms’ labor intensity to identify the effects of the regulation. The results show that restricting labor dispatch significantly increases total factor productivity (TFP). Mechanism analysis indicates that productivity gains are driven by workforce upgrading, capital-labor substitution, and increased innovation. Moreover, the regulation improves employee compensation, reduces pay inequality, and enhances firm-specific corporate social responsibility performance. Our findings provide novel evidence that well-designed labor regulations can simultaneously promote efficiency and equity, contributing to high-quality and inclusive economic growth in emerging economies.
published_date 0001-01-01T05:32:10Z
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score 11.096007

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