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Firm Labor Costs and Total Factor Productivity:A Study of "Forced" Mechanisms
Pages: 118-132
Year: Issue:  3
Journal: Nankai Economic Studies

Keyword:  Labor Cost RisingTFPForced MechanismTechnological Advance;
Abstract: The rise of labor cost has attracted extensive attention recently,this paper aims at exploring whether the rising labor cost force the transformation and upgrading process of firms,and then improve TFP.We find that firms with labor cost increasing become more likely to improve production efficiency;The effect will become more significant in NonSOEs and labor-intensive enterprises. Moreover,the evidence supports our interpretion of the mechanism:TFP is drived by positive technical advance when the labor cost is increasingly rising.This paper shows that the labor cost will be rising as a long-term trend and it will also positively affect TFP in the firm-level. The government should focus on promoting market-based allocation of labor resources,improve the enthusiasm of enterprises to participate in global market competition,promote the usage efficiency of production factors to drive sustainable growth.
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