Firms and Productivity

Beijing central business district buildings and highways bird's eye view.

Firms and Productivity

Developing high-quality, in-depth data on firms and workers in China.

Overview

There is a lack of high-quality, in-depth data on firms and workers in China, which has historically prevented the systematic study of critical issues facing China’s manufacturers. Existing firm datasets contained limited information or lacked a representative sample of firms and workers. This has all changed with the recently-completed China Employer-Employee Survey, a collaborative effort led by Center Director Hongbin Li, and the most comprehensive survey of Chinese firms to date. The rich dataset stemming from this survey covers many questions that can be used to study trade, the role of State-Owned Enterprises, industry subsidies, and intellectual property rights protections, which have immediate and long-term value for researchers and policymakers alike. Specific focal areas include the role of robotic automation in Chinese factories, changes in manufacturing productivity over time, the prevalence of zombie firms in China, and the role of government interventions, management, and trade on industrial productivity.

Featured Project

China Employer-Employee Survey

The China Employer-Employee Survey led by Hongbin Li continues to provide academics and policymakers access to the most comprehensive survey of Chinese manufacturing firms and their employees, including published articles on managerial behavior, productivity of state-owned enterprises, and the rise of robots in China's manufacturing sector.

It is jointly initiated by researchers from Hong Kong University of Science and Technology, Stanford University, Wuhan University, and the Chinese Academy of Social Sciences.

Video: The Story Behind the China Employer-Employee Survey

Video: The Story Behind the China Employer-Employee Survey

Publications

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Working Papers

Entrepreneurial Reluctance: Talent and Firm Creation in China

Chong-En Bai, Ruixue Jia, Hongbin LI, Xin Wang
National Bureau of Economic Research (NBER) , 2021
The theoretical literature has long noted that talent can be used in both the entrepreneurial and non-entrepreneurial sectors, and its allocation depends on the reward structure. We test these hypotheses by linking administrative college admissions data for 1.8 million individuals with the universe of firm registration records in China. Within a college, we find that individuals with higher college entrance exam scores – the most important measure of talent in this context – are less likely to create firms, but, when they do, their firms are more successful than those of their lower-score counterparts. Additional survey data suggest that higher-score individuals enjoy higher wages and are more likely to join the state sector. Moreover, the score-to-firm creation relationship varies greatly across industry, according to the size of the state sector. These findings suggest that the score is positively associated with both entrepreneurial ability and wage-job ability but higher-score individuals are attracted away by wage jobs, particularly those of the state sector.
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Policy Briefs

Tracking China's Economic Path

Hongbin Li, Scott Rozelle
2021
Stanford scholars are setting and expanding research agendas to analyze China’s economic development and its impact on the world. The newly launched Stanford Center on China’s Economy and Institutions — co-directed by SIEPR senior fellows Hongbin Li and Scott Rozelle — is supporting their work. In this SIEPR Policy Brief, Li and Rozelle outline the research underway by the new center's affiliates.
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Working Papers

Just Above the Exam Cutoff Score: Elite College Admission and Wages in China

Ruixue Jia, Hongbin Li
National Bureau of Economic Research , 2021
A burgeoning literature has documented the importance of elite colleges. Yet, little is known about access to elite education and its labor market implications in China, a country that produces one in every five college graduates in the world. College admission in China is governed by a single exam—the national college entrance exam, and the government sets admission cutoff scores for elite colleges. We examine the impacts of scoring above the elite-tier cutoff on a student's access to elite colleges and wage outcomes after graduation, using the discontinuity around the cutoff score. By employing hand-collected survey data, we find that scoring above the cutoff not only increases the chance of entering an elite college but also raises a young person's first-job wages after graduation. We also find that those just above the cutoff have peers with higher scores and better social networks than those below the cutoff, but it is less clear whether the two groups use their time differently in college.
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Journal Articles

The Performance of State-Owned Enterprises: New Evidence from the China Employer-Employee Survey

Hong Cheng, Hongbin Li, Tang Li
Economic Development and Cultural Change , 2021
Drawing on data from a random sample of manufacturing firms collected in 2016 for the China Employer-Employee Survey (CEES), we examine differences in measures of productivity and financial returns between state-owned enterprises (SOEs) and private firms in China. The summary statistics show that labor productivity and total factor productivity are generally higher at SOEs than at private firms, but the productivity advantage of SOEs can mostly be explained by the higher levels of human capital of their workers, greater market power, and better management. Furthermore, SOEs’ advantage in productivity exists only in industries with higher SOE concentrations. In contrast, measures of financial returns—return on assets and return on equity—are lower for SOEs than for private firms. We believe that these results may reflect the fact that SOEs generally have easier access to capital, human capital, and markets than other types of firms in China.
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Working Papers

Pandemics, Global Supply Chains, and Local Labor Demand: Evidence from 100 Million Posted Jobs in China

Hanming Fang, Chunmian Ge, Hanwei Huang, Hongbin Li
National Bureau of Economic Research , 2020
This paper studies how the COVID-19 pandemic has affected labor demand using over 100 million posted jobs on one of the largest online platforms in China. Our data reveals that, due to the effects of the pandemic both in China and abroad, the number of newly posted jobs within the first 13 weeks after the Wuhan lockdown on January 23, 2020 was about one third lower than that of the same lunar calendar weeks in 2018 and 2019. Using econometric methods, we show that, via the global supply chain, COVID-19 cases abroad and in particular pandemic-control policies by foreign governments reduced new job creations in China by 11.7%. We also find that Chinese firms most exposed to international trade outperformed other firms at the beginning of the pandemic but underperformed during recovery as the Novel Coronavirus spread throughout the world.
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Journal Articles

Wage Differential between Rural Migrants and Urban Workers in the People's Republic of China

Hong Cheng, Dezhuang Hu, Hongbin Li
Asian Development Review , 2020
Using a recently constructed dataset that draws on the China Employer–Employee Survey, this paper provides new evidence on the earnings gap between rural migrant and urban manufacturing workers in the People's Republic of China. When we only control for province fixed effects, we find that rural migrant workers are paid 22.3% less per month and 32.2% less per hour than urban workers. We find that the gap in hourly earnings is larger than the gap in monthly earnings because rural migrant workers tend to work an average of 5.6% more hours per month than urban workers. Using these data, we also find that 87.4% of the monthly earnings gap and 73.9% of the hourly earnings gap can be attributed to differences in the individual characteristics and human capital levels of rural migrant and urban workers. Furthermore, we find that this unexplained earnings gap varies among different groups of workers. The earnings gap is much larger (i) for workers in state-owned enterprises than in nonstate-owned enterprises, (ii) for college-educated workers than workers with lower levels of educational attainment, and (iii) in Guangdong province than in Hubei province.
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Journal Articles

The Rise of Robots in China

Hong Cheng , Ruixue Jia , Dandan Li, Hongbin Li
Journal of Economic Perspectives , 2019
China is the world's largest user of industrial robots. In 2016, sales of industrial robots in China reached 87,000 units, accounting for around 30 percent of the global market. To put this number in perspective, robot sales in all of Europe and the Americas in 2016 reached 97,300 units (according to data from the International Federation of Robotics). Between 2005 and 2016, the operational stock of industrial robots in China increased at an annual average rate of 38 percent. In this paper, we describe the adoption of robots by China's manufacturers using both aggregate industry-level and firm-level data, and we provide possible explanations from both the supply and demand sides for why robot use has risen so quickly in China. A key contribution of this paper is that we have collected some of the world's first data on firms' robot adoption behaviors with our China Employer-Employee Survey (CEES), which contains the first firm-level data that is representative of the entire Chinese manufacturing sector.
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Journal Articles

Skill Complementarities and Returns to Higher Education: Evidence from College Enrollment Expansion in China

Hongbin Li, Yueyuan Ma, Lingsheng Meng, Xue Qiao, Xinzheng Shi
China Economic Review , 2017
We find that the increased supply of college graduates resulting from college enrollment expansion in China increases college premiums for older cohorts and decreases college premiums for younger cohorts. This finding is inconsistent with the canonical model that assumes substitution among workers of different ages. We subsequently build a simple model that considers complementarities among workers of different ages and different skill levels. Our model predicts that the college premium of senior workers increases with the supply of young college graduates when skill is a scarce resource. The model's predictions are supported by empirical tests.
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Journal Articles

Human Capital and China’s Future Growth

Hongbin Li , Prashant Loyalka , Scott Rozelle, Binzhen Wu
Journal of Economic Perspectives , 2017
In this paper, we consider the sources and prospects for economic growth in China with a focus on human capital. First, we provide an overview of the role that labor has played in China's economic success. We then describe China's hukou policy, which divides China's labor force into two distinct segments, one composed of rural workers and the other of urban workers. For the rural labor force, we focus on the challenges of raising human capital by both increasing basic educational attainment rates as well as the quality of education. For the urban labor force, we focus on the issues of further expanding enrollment in college education as well as improving the quality of college education. We use a regression model to show the typical relationship between human capital and output in economies around the world and demonstrate how that relationship has evolved since 1980. We show that China has made substantial strides both in the education level of its population and in the way that education is being rewarded in its labor markets. However, as we look ahead, our results imply that China may find it impossible to maintain what appears to be its desired growth rate of 7 percent in the next 20 years; a growth rate of 3 percent over the next two decades seems more plausible. Finally, we present policy recommendations, which are rooted in the belief that China continues to have substantial room to improve the human capital of its labor force.
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Journal Articles

How Do Exchange Rate Movements Affect Chinese Exports: A Firm-Level Investigation

Hongbin Li, Hong Ma , Yuan Xu
Journal of International Economics , 2015
This paper provides first-hand firm-level evidence on Chinese exporters' reaction to RMB exchange rate movements. We find that the RMB price response to exchange rate changes is very small, indicating relatively high exchange rate pass-through into foreign currency denominated prices, while the volume response is moderate and significant. Furthermore, exporters with higher productivity price more to market, though the pass-through is still very high. Other sources of heterogeneity, such as import intensity, distribution costs, income level of the destination countries, and foreign ownership also matter. Moreover, RMB appreciation reduces the probability of entry as well as the probability of continuing in the export market.
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Journal Articles

Family Ties and Organizational Design: Evidence from Chinese Private Firms

Hongbin Cai, Hongbin Li, Albert Park , Li-An Zhou
Review of Economics and Statistics , 2013
Analyzing data from a unique survey of managers of Chinese private firms, we investigate how family ties with firm heads affect managerial compensation and job assignment. We find that family managers earn higher salaries and receive more bonuses, hold higher positions, and are given more decision rights and job responsibilities than nonfamily managers in the same firm. However, family managers face weaker incentives than professional managers, as seen in the lower sensitivity of their bonuses to firm performance. Our findings are consistent with the predictions of a principal-agent model that incorporates family trust and endogenous job assignment decisions.
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Journal Articles

Entrepreneurship, Private Economy, and Growth: Evidence from China

Hongbin Li, Zheyu Yang , Xianguo , Haifeng Zhang , Junsen Zhang
China Economic Review , 2012
This paper examines the impact of entrepreneurship on economic growth by using a panel data set of 29 provinces in China over 20 years. Two indicators of entrepreneurship are defined and introduced into the traditional growth regression framework that is estimated using the system generalized method of moments. We also use the ratio of staff and workers of state-owned enterprises and per capita sown land area as the instrumental variables to identify the causal effect of entrepreneurship on economic growth. Our results suggest that entrepreneurship has a significant positive effect on economic growth and this finding is robust even after we control for other demographic and institutional variables. Our study provides some evidence that may be used as a basis for evaluating the effect of China’s policy on private business which has been increasingly relaxed since the late 1970s.
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Journal Articles

Estimating Returns to Education Using Twins in Urban China

Hongbin Li , Pak Wai Liu, Junsen Zhang
Journal of Development Economics , 2012
This paper empirically estimates the return to education using twins data that the authors collected from urban China. Our ordinary least-squares estimate shows that one year of schooling increases an individual's earnings by 8.4%. If we use a within-twin fixed effects model, the return is reduced to 2.7%, but rises to 3.8% after the correction of measurement error. These results suggest that a large portion of the estimated returns to education is due to omitted ability or the family effect. We further investigate why the true return is low and the omitted ability bias high, and find evidence showing that it may be a consequence of China's education system, which is highly selective and exam oriented. More specifically, we find that high school education may mainly serve as a mechanism to select college students, but as a human capital investment per se it has low returns in terms of earnings. In contrast, both vocational school education and college education have a large return that is comparable to that found in the United States.
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