Growing Up in China's SOEs Reform
50 Pages Posted: 23 Jun 2016 Last revised: 28 Aug 2016
Date Written: June 21, 2016
This paper studies the impact of SOEs labor restructuring reform in the late 1990s in urban China on individuals’ trust in the central and local government. By exploiting provincial variation in number of layoffs, together with cohort-specific variation arising from the negative employment shock, we find that individuals with more exposure to layoffs in provinces and working ages during the reform period are associated with less trust in the central government and local government. This finding is robust to various checks including using migration restricted samples, adding more family backgrounds and provincial characteristics, as well as doing the placebo test. According to our estimates, more heavy burden of social pensions resulting from massive number of layoffs contributes to lower level of individuals’ trust in governments. In addition, “Impressionable Years Hypothesis” based on social psychology are able to explain the negative impact of layoffs on individuals’ trust in governments.
Keywords: China SOEs Reform, Trust in Government, Cohort Effects
JEL Classification: N35, Z13
Suggested Citation: Suggested Citation