A Study On The Effects Of Rising Labor Costs On The TFP Of Chinese Enterprises

The increase of labor input,capital accumulation and total factor productivity(TFP)is the driving source of economic growth.China's economy has been grOAvn rapidly in the course of forty years of reform and opening up,which was benefited from cheap and plentiful supply of Labor.However,it is worth noting that China,s labor costs continue rising rapidly in recent years and the traditional economic growth mode is facing the pressure of transformation.The 19th party congress report further pointed out that China's economy is at a crucial stage of transforming its development pattern,optimizing its economic structure and transforming its growth drivers,which requires us to reform the quality,efficiency and driving forces of economic development and raise TFP.It is not only a fundamental way to deal with the rising labor force cost,but also an inevitable requirement for the sustainable development of China*s economy to intensify the contribution of total factor productivity growth to China's economic development.Based on the above background,the rise in labor costs and changes on the TFP of Chinese enterprises have become important topics for further research in the economic transition period.This paper launches study around the topic of the impact of rising labor cost on total factor productivity of Chinese enterprises.The research includes the following four core contents:Firstly,it constructs the theoretical framework of the impact of rising labor costs on the TFP.lt expounds the influence mechanism of rising labor costs on the TFP from the perspectives of Innovation incentive,element substitution,enterprise entry and discusses the differences in impact of rising labor costs on the TFP of different enterprises.Secondly,it calculates the TFP of enterprises based on the method of ACF and makes an empirical analysis of the impact of rising labor costs on the TFP,and it establishes the mediating effect model to examine the mechanism of the rising labor costs affecting the TFP of enterprises.Thirdly,it researches the differences in impact of rising labor costs on enterprises empirically with different degree of financing constraint and analyzes the influence mechanism of financing constraints from the perspective of internal capital holding and external capital cost.At the same time,the growth mechanism of the TFP is tested from the perspective of financing constraints.Fourthly,it empirically researches the differences in impact of rising labor costs on the TFP of state-owned,private and foreign-funded enterprises.On the basis of the existence of impact difference,it further analyzes the deep reasons for the deviation of the efficiency growth of state-owned enterprises and discusses the economic effects because of the variation of TFP from the perspective of market share of private enterprises and so on.We have reached the following four core conclusions in this paper.Firstly,theoretical research shows that the rising labor costs has a positive effect on the TFP growth of enterprises,which is generated through innovation input and capital substitution.Financing constraints aggravate the liquidity risk faced by the change of production mode and raise the external financing cost,which in turn restrains the promoting effect of rising labor costs on TFP of enterprises.There is heterogeneity in resource acquisition ability,policy burden and investment motivation among State-owned enterprises,private enterprises and foreign enterprises,which leads to the difference in influence of rising labor costs on TFP of enterprises of different ownership.Secondly,the paper empirically examines the impact of rising labor costs on TFP and its influencing mechanism,which shows that the increase of labor cost has a significant positive impact on the TFP of enterprises and it is mainly realized through factor substitution path,however,the mediating effect by innovation incentive mechanism is relatively weak.The empirical results also show that rising labor costs increases the productivity level of entering firms,but does not force low-productivity enterprises out of the market,instead,it leads to the expansion of some low-productivity enterprises.Thirdly,the rising of labor force cost has a more positive impact on the TFP of enterprises with loose financing constraints compared with enterprises with severe financing constraints.The more sufficient the internal capital and the lower the external financing cost is,the stronger the promoting effect of rising labor costs on the TFP of enterprises will be.The empirical result further shows that when the external financing cost of enterprises over threshold,the promoting effect of rising labor costs on the total factor productivity of enterprises reverts to negative.Financing constraints reduce the asset equipment update speed and innovation input level of enterprises,which leads to the asymmetric variation of enterprise TFP under rising labor costs.Fourthly,the promotion of labor cost increase on total factor productivity of state-owned enterprises,private enterprises and foreign-funded enterprises decreases in turn.The impact of rising labor costs on enterprises of different ownership is more varied in the sample of heavy industries and capital-intensive enterprises,and the improvement of regional marketization helps to narrow the gap of the impact of rising labor costs on enterprises of different ownership.Further analysis shows a divergence between productivity and margin growth in the case of policy burdens leading to higher labor costs for state-owned enterprises,which means that the stronger the policy burden,the faster the rate of profit margin decline.Meanwhile,rising labor costs erodes the productivity advantage of private companies,which leads to the decrease of output market share and employment market share of private enterprises.The innovation of this paper includes the following three aspects:Firstly,it makes the impact of rising labor costs on the TFP of Chinese enterprises clear and definite and provides policy implications for the improvement of the TFP of Chinese enterprises:what is the main mechanism that the increase of labor force cost affects the TFP of enterprise and how to further strengthen the positive impact of rising labor costs on total factor productivity?It makes up for the lack of existing research.Secondly,it analyzes the influencing mechanism from the perspective of financing constraint and conducts an empirical research,which expands the analytical framework of existing studies to a greater degree.Thirdly,it clarifies the impact of rising labor costs on the difference of total factor productivity of enterprises of different ownership types based on the reality of China,which contributes to grasp the changing characteristics of total factor productivity of all ownership types in the transition period.