On August, Prof. Kong Dongmin from School of Economics and his team published a paper named Political promotion and labor investment efficiency on China Economic Review (Volume 50, August 2018, Pages 273-293). Prof. Kong is the first author, his PhD student Xiang Junyi is the corresponding author and Liu Shasha, the assistant professor of Jinan University, is the second author.
The paper investigates the impact of political promotion incentives on the labor investment efficiency of firms by focusing on human capital misallocation. The study shows that promotion incentives of local politicians significantly increase firm-level employment growth but decrease labor investment efficiency. Moreover, causality is established by analyzing exogenous shocks on the promotion incentives of local politicians, and placebo tests further confirm the causality. Further study suggests that for under-hiring firms, promotion incentives only increase the employment of low human capital, thus distorting human capital structure and decreasing labor investment efficiency. Finally, a large amount of robustness checks were made to ensure the robustness of the empirical results.
This study provides clear policy implications for governments in emerging market economies concerned about the efficiency of labor investment and optimization of human capital allocation. The results call attention to the urgency for regulators in developing economies to focus on the human capital structure at firm level when improving employment rate.
China Economic Review, as one of the influential journals in economics, mainly publishes original papers which take Chinese economy as a research subject. The journal issues 4 volumes every year with about 90 articles.
Paper link: https://doi.org/10.1016/j.chieco.2018.05.002