TY  - JOUR
AU  - Cooper,Russell
AU  - Gong,Guan
AU  - Yan,Ping
TI  - Costly Labor Adjustment: Effects of China's Employment Regulations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17948
PY  - 2012
Y2  - March 2012
UR  - http://www.nber.org/papers/w17948
L1  - http://www.nber.org/papers/w17948.pdf
N1  - Author contact info:
Russell Cooper
Department of Economics
The Pennsylvania State University
611 Kern
State College, PA 16802
E-Mail: russellcoop@gmail.com

Guan Gong
School of Economics
Shanghai University of Finance and Economics
777 Guoding RD, Shanghai
CHINA
E-Mail: ggong@mail.shufe.edu.cn

Ping Yan
National School of Development
China Center for Economic Research
Peking University
E-Mail: pyan@ccer.edu.cn
AB  - This paper studies the employment and productivity implications of new labor regulations in China. These new restrictions are intended to protect workers' employment conditions by, among other things, increasing firing costs and increasing compensation. We estimate a model of costly labor adjustment from data prior to the policy. We use the estimated model to simulate the effects of the policy. We find that increases in severance payments lead to sizable job creation, a significant reduction in labor reallocation and an increase in the exit rate. A policy of credit market liberalization will reduce employment, slightly increase labor reallocation and reduce exit. The estimated elasticity of labor demand is about unity so that an increase in the base wage leads to sizable job losses.
ER  -