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Political Economy of Labor Retrenchment:Evidence Based on China's State-Owned Enterprises

37 Pages Posted: 15 Jan 2005  

Yifan Hu

The University of Hong Kong - Faculty of Business and Economics

Sonja Opper

Lund University - Department of Economics

Sonia M. L. Wong

University of Hong Kong

Date Written: November 2004

Abstract

This study examines the determinants of the restructuring of China's SOEs in the late 1990s. Our study yields four major findings. First, we find that the degree of labor retrenchment is negatively related to enterprise performance, suggesting that poor performance is a major force driving labor restructuring. Second, we find that market competition is related to both traditional and corporatized SOEs, suggesting that market competition gradually becomes an effective disciplinary force for managers of China's SOEs. Furthermore, we offer evidence that decisions about labor retrenchment in traditional SOEs are related to the local government's fiscal position and to local reemployment conditions for laid-off workers. In contrast, labor decisions in corporatized SOEs are not related to these two variables. This suggests that corporatized SOEs with partial private ownership seem to enjoy higher autonomy in labor decisions.

Keywords: Political Control, State Owned Enterprises, Labor Restructuring

JEL Classification: P26, P31, G38

Suggested Citation

Hu, Yifan and Opper, Sonja and Wong, Sonia M. L., Political Economy of Labor Retrenchment:Evidence Based on China's State-Owned Enterprises (November 2004). Available at SSRN: https://ssrn.com/abstract=648902 or http://dx.doi.org/10.2139/ssrn.648902

Yifan Hu

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Sonja Opper

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden
+46 046-2227906 (Phone)
+46 046-2224118 (Fax)

Sonia Wong (Contact Author)

University of Hong Kong ( email )

1021, KKL Building
Pokfulam Road
Hong Kong
China

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