Labor protection, labor costs, and China's outward foreign direct investment

Zheng Li, Shan Gao and Shunfeng Song

International Review of Economics & Finance, 2023, vol. 84, issue C, 444-459

Abstract: Considering the 2008 Labor Contract Law as a quasi-natural experiment, this paper constructs a double difference model to examine the relationships among labor protection, labor costs, and China's outward foreign direct investment (OFDI). First, we theoretically study the mechanism of the impacts of labor protection. Then, we empirically confirm that the 2008 Labor Law significantly increased China's OFDI, and that this effect is heterogeneous among different firms. Our empirical evidence further suggests that the law increased the probability of Chinese enterprises' OFDI by increasing firms' wages, fixed labor costs, and the level of labor protection.

Keywords: Labor contract law; Labor cost; Labor protection; Outward foreign direct investment (search for similar items in EconPapers)
JEL-codes: D24 F21 J31 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:84:y:2023:i:c:p:444-459

DOI: 10.1016/j.iref.2022.11.022

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