The Study On Labor Cost And Enterprise Production Efficiency

This dissertation investigated the impact of rising labor costs as a symbol of the minimum wage's implementation on enterprises' production efficiency and its mechanism.We studied the efficiency consequences caused by rising labor costs from the perspective of the production efficiency's measurement,dynamic changes and mechanism interpretation,thereby futher proposing recommendation of make reasonable labor polices,guide the flow of factor resources and promote the industrial structure's upgrading.Among the many indicatiors that measure enterprises' production efficiency,this dissertation heighted three areas of related research:(1)the trend and influence mechanism of enterprises' total factor productivity;(2)the loss of labor resources allocation efficiency and its influence mechanism;(3)the trend and influence mechanism of enterprises' markup.Finally,this dissertation constructed a theoretical model to study the impact of labor costs on enterprises' profitability,combined the background of current policy to give conclusion and specify the prospection of future research.There are nine chapters in this dissertation,we conducted our research in a sequence of institutional background,phenomenon observation,literature review,proposing questions and solution.Each chapter's main contents as follows:The first chapter is introduction,which describes this dissertation's research background and significance,and give the research ideas and research content.Under the background of economic “new normal” situation,how to make reasonable labor force policy to increase labor remuneration as well as achieve production efficiency's increase,improve industrie's competitiveness,and promote supply-side structural reforms,is currently one of the major challenges for China's economic development.The second chapter introduces the domestic and foreign backgrounds of the minimum wage's system,and based on the manually collected minimum wage data for each district and county in each year,it describes the changes in trends and characteristics over the years in detail,and give out the fact that the labor costs rising caused by the the minimum wage standard's increase,which intoduces the motivation and starting point of this studyThe third chapter is literature review,which comprehensively reviews minimum wage's economic effects and the factors affecting enterprises' production efficiency in two aspects.By summarizing the gaps and deficiencies in the existing literatures,we further demonstrate the innovation and value of this study.At the same time,we selecte the total factor productivity,labor resource allocation efficiency,markup,and profitability to measure enterprise's production efficiency by referring to the existing literature.The fourth chapter describes the data,including data sources,data processing methods,and variable indicators used in this empirical study.The fifth chapter studies the impact of rising minimum wage standard on total factor productivity from the perspective of the enterprises' market evolution,and further decomposes the growth of total factor productivity into three parts:productivity effect,market share effect,and enterprises net entry effect.We found the net entry effect is the largest contribution to productivity growth,the minimum wage standard's rising increases the total productivity by promoting the net entry effect of the enterprise.The sixth chapter constructes an indicator which can intuitively reflects the efficiency of enterprise labor resources allocation by estimating the production function.At the same time,we use regression discontinuity model(RD)to evaluate the impact of the implementation of the minimum wage on labor resource allocation's efficiency.Emprical results show that minimum wage's implementation reduced enterprise's investment in labor factors by 5.6% and increased the capital input by 3.4%,this production factor's adjustment behavior led to a 3.61%-5.71%reduction in labor resources' allocation efficiency.In addition,the increase in labor costs has a greater influence on factor resources' allocation efficiency of non-stateowned enterprises,labor-intensive enterprises,and high marup enterprises.The seventh chapter uses the method of De Loecker et al.(2012)to calculate enterprises' markup.It is used to measure the enterprises' competition efficiency in the product market,we also discuss the impact of labor cost on markup and its mechanism.Research shows that rising labor costs can “force” enterprise to participate in innovation activities and increase labor productivity,thereby increasing the enterprises' competitiveness in the product market.The eighth chapter constructs a labor cost model to discuss the theoretical mechanism of minimum wage's implementation impact on enterprises' profitability as well as constructs a difference-in-difference(DID)framework to empirically investigate the theoretical mechanism of model prediction.We found that unlike the conclusions of related literature,the minimum wage's implementation has completely different effects on enterprises' profitability in long term and short term.The production factor's adjustment mechanism increase labor costs but do not reduce enterprises' profitability in long-term.The ninth chapter summarizes the main contents and conclusions of this dissertation,it discusses the policy implications of the conclusions and points out the deficiencies and further research directions in the future.The mian conclusions of this study can be summarized as follows:1.The “market selection effect” triggered by the increase in minimum wage standard will eliminate lower-productivity enterprises to exit the market and select higher potential productivity enterprises to enter into market,thus promoting the rising of overall total factor productivity.The decomposition results show that the entry and exit effects of enterprise largestly contribute to productivity growth,which is 47.9%.The rising in the minimum wage standard increases the entry effect and exit effect,which in turn increases overall TFP.2.The increase in labor costs caused by the minimum wage rules reduced enterprises' labor input and increased capital input,lower labor input and higher capital investment increased marginal product of labor.However,due to the fact that the marginal cost of labor does not change significantly in short term,enterprises' factor adjustment behavor will lead to an increase in the mismatch between the marginal product of labor and the marginal cost of labor,which will lead to a decline in the allocation efficiency of labor resources.3.Raising products' price,engaging in more innovative R&D activities and adopting new technologies to increase productivity are the key channels of which the rising in labor costs increases enterprises' markup.The “backward effect” caused by the increase in labor costs can promote enterprises to optimize their production structure and increase their production efficiency,thereby enhancing their competitiveness in the product market.4.The theoretical model of labor costs and enterprises' profitability shows that enterprises have no time to make adjustments to the production factors in the shortterm,so the increase in labor costs will lead to an absolute decline in enterprises' profitability.However,in the long-term,enterprises gradually adjust to the policy shock and adjust the input of production factors.Therefore,the impact of the increase in labor costs on the profitability is uncertain in the long-term.The empirical research results show that Chinese enterprises will significantly reduce the input of labor factors in the long-term.When the decline in the use of labor factors exceeds the increase in marginal labor costs,enterprises' profitability will increase.This thesis improves the current study in the aspects of research angle and empirical method.The details are as follows:1.Research perspective innovationFirstly,although the existing literatures are very rich in the study of labor costs,many studies have adopted different measurement methods to construct enterprises' production efficiency indicators and explore its influencing factors.However,the existing domestic research has not focused on the impact of the increase in labor costs on enterprises' production efficiency,and there is also little attention to changes in the production behavior of enterprises in this process.This dissertation introduces in-depth the mechanism of the rising labor cost's impact on production efficiency by introducing the behavior of enterprises entering and exiting the market,adjustments in input of production factors,innovation activities,and pricing behavior.Secondly,the minimum wage system,as the most direct adjustment method in the labor market,has extensive and far-reaching effects on the labor market and enterprises' behavior.Although academia are currently keen on discussing the economic effects caused by the implementation of the minimum wage system,they are mainly focused on examining their fairness effects.They lack a detailed and systematic study of the efficiency of the minimum wage in the economic literature.In this perspective,our research is a new beneficial attempt and research supplement.Thirdly,the starting point of existing literatures examine the impact of labor costs on firms' production behavior are generally that enterprises will adjust their production and operation activities according to external labor cost policies,triggering factor resource's reallocation among enterprises,resulting in efficiency loss.However,there are few researches that focus on answering questions such as how the enterprises' production and business activities will change,and how the allocation of factor resources will change between enterprises.This study on the labor resource's allocation efficiency is an attempt to give a clear answer and indepth development of the above issues.Finally,current domestic scholars' research on enterprises' profitability is still very limited.Because the profitability is another equivalent measurement of the management efficiency of enterprises,this research is also an important exploration of the enterprises' business problems.2.Empirical method innovationFirstly,this paper uses different estimation methods to estimate the production function of enterprises according to different research purposes.When estimating the productivity of enterprises,we use the OP method(Olley & Pakes,1996)to eliminate the problem of sample selection caused by the entry and exit of enterprises.In estimating the enterprises' markup,we select the ACF method(Ackerberg et al.,2015)to use investment as a function of all factor inputs to solve the endogenous problem between productivity and factor input,thus obtaining unbiased eistimator.Secondly,in the study of enterprises' labor resources allocation efficiency,we adopted a regression discontinuity(RD)identification strategy,we obtained a range estimation results by relaxing the “pseudo-random” assumptions as well as a series of validity tests,thus the empirical results are more convincing.As far as we know,this method has not been widely used in domestic direct assessment of labor policy.Thirdly,in the study of enterprises' profitability,unlike the traditional fixed effect model,we regard the implementation of the minimum wage policy as a“quasi-natural experiment”,dividing the enterprise into experimental groups that are most affected by the minimum wage policy and control group that basically unaffected by the policy,and then we adopt difference-in-difference framework(DID)to examine the impact of the minimum wage policy on the each group of companies' profitability and obtain the evaluation result.Using the “quasi-natural experiment” method can effectively avoid the problem of conclusive deviation caused by data measurement bias and regression design itself.Finally,a variety of methods are used for robustness check.Whether the research conclusion is robust or not is the key to the success or failure of the study.In this study,the robustness of the conclusion will occupy a very important space,we take Bartik's(1993)instrumental variable(IV)method,interaction fixed-effect model and DID framework to perform a large number of robustness tests to verify empirical results' unbiased and robustness.