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Labor Market Dynamics in Urban China and the Role of the State Sector

Author

Listed:
  • Shuaizhang Feng

    (Jinan University)

  • Naijia Guo

    (The Chinese University of Hong Kong)

Abstract

This paper studies the effect of state-owned enterprises on the dynamics of the Chinese urban labor market. Using longitudinal monthly panel data, we document very low dynamics in the labor market, especially in the state sector. We develop and calibrate an equilibrium search and matching model with three differences between the state and the non-state sector: labor productivity, labor adjustment cost, and workers' bargaining power. Counterfactual analysis shows that the lack of dynamics is mainly driven by the strong bargaining power of state-sector workers. Eliminating the differences between the two sectors substantially reduces the unemployment rate and long-term unemployment rate.

Suggested Citation

  • Shuaizhang Feng & Naijia Guo, 2019. "Labor Market Dynamics in Urban China and the Role of the State Sector," Working Papers 2019-008, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2019-008
    Note: MIP
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Feng_Guo_2019_labor_dynamics-urban-china.pdf
    File Function: First version, February 17, 2019
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    References listed on IDEAS

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    1. Jiang, Kun & Wang, Susheng, 2022. "Internal labor markets with two types of promotion and two tiers of salary: theory and evidence from China," China Economic Review, Elsevier, vol. 72(C).

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    More about this item

    Keywords

    state sector; labor market dynamics; search and matching; China; long-term unemployment;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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