Does Enhanced Employment Protection Increased Labor Share?—Evidence from the Labor Contract Law Enactment in China
We investigate how firms'labor share responds to the enhanced employment protection which is exogenously induced by the Labor Contract Law enactment in China 2008.We find that this legal reform led to a significant increase in firms'labor share,and these effects are more pronounced in regions with a better legal institutional environment,higher levels of labor mobility,and enterprises with weaker financing constraints.Moreover,we find two mechanisms through which the law impacts labor share.First,employment protection raises labor income compensation by increasing the relative employment ratio of skilled and R&D-oriented labor.Second,employment protection reduces labor flexibility,which in turn decreases business revenue.
万方数据
