Is Loss of Political Connection a Gain for Labor? The Effect of Anti-Corruption Policy on Labor Protection in China

55 Pages Posted: 2 May 2022

See all articles by Xuchao Li

Xuchao Li

Wuhan University - Economics and Management School

Jiankun Lu

Zhejiang University of Finance and Economics (ZUFE)

Xiang Shao

Fudan University - School of Management

Jing Zhao

Wuhan University - Economics and Management School

Multiple version iconThere are 2 versions of this paper

Date Written: April 3, 2022

Abstract

This paper studies the relationship between political connections and corporate compliance with labor protection. Utilizing a sudden disruption of political connections due to an anti-corruption policy, the paper finds that depoliticization improves firms’ compliance with the social security law. Furthermore, using court data, the analysis finds that depoliticization increases firms’ legal risk in labor disputes. It also finds that the effect of depoliticization on firms’ social security contributions is greater in provinces with strong enforcement and when the connected official has a closer relationship with local governance, while the effect is attenuated if firms are state-owned enterprises or less labor intensive. Moreover, the paper finds no evidence that depoliticization affects firms’ other forms of employment benefits.

Keywords: Labor protection; Social security contribution; Anti-corruption; Political connection

JEL Classification: J08; D73; P30; G38

Suggested Citation

Li, Xuchao and Lu, Jiankun and Shao, Xiang and Zhao, Jing, Is Loss of Political Connection a Gain for Labor? The Effect of Anti-Corruption Policy on Labor Protection in China (April 3, 2022). Available at SSRN: https://ssrn.com/abstract=4091676 or http://dx.doi.org/10.2139/ssrn.4091676

Xuchao Li

Wuhan University - Economics and Management School ( email )

Wuhan, Hubei
China

Jiankun Lu

Zhejiang University of Finance and Economics (ZUFE) ( email )

Hangzhou, Zhejiang Province 310018
China

Xiang Shao (Contact Author)

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

Jing Zhao

Wuhan University - Economics and Management School ( email )

Wuhan, Hubei
China

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