China's New Labour Contract Law: No Harm to Employment?

38 Pages Posted: 8 Jan 2009  

Michael Funke

University of Hamburg - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Yu-Fu Chen

University of Dundee - Department of Economic Studies

Date Written: December 30, 2008

Abstract

In January 2008, China adopted a new labour contract law. This new law represents the most significant reform to the legislation on employment relations in mainland China in more than a decade. The paper provides a theoretical framework on the inter-linkages between labour market regulation, option value and the choice and timing of employment. All in all, the paper demonstrates that the Labour Contract Law in its own right will have only small impacts upon employment in the fast-growing Chinese economy. Rather, induced increasing unit labour costs represent the real issue and may reduce employment.

Keywords: China, labour contract law, real options, employment

JEL Classification: C61, D81, D92, J23

Suggested Citation

Funke, Michael and Chen, Yu-Fu, China's New Labour Contract Law: No Harm to Employment? (December 30, 2008). BOFIT Discussion Paper No. 29/2008. Available at SSRN: https://ssrn.com/abstract=1324592 or http://dx.doi.org/10.2139/ssrn.1324592

Michael Funke (Contact Author)

University of Hamburg - Department of Economics ( email )

Von-Melle-Park 5
room 2128 C rise
Hamburg, 20146
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Yu-Fu Chen

University of Dundee - Department of Economic Studies ( email )

Dundee DD1 4HN, Scotland
United Kingdom
+44 1382 344 383 (Phone)
+44 1382 344 691 (Fax)

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