The Effects of the Labor Contract Law on the Chinese Labor Market

This article uses a micro-level data set to investigate the effect of China's Labor Contract Law, implemented in 2008, on the Chinese labor market. Our empirical evidence shows that the labor law reform significantly improved employee benefit. This effect is greater for state-owned enterprises, for large and domestic firms, and for regions with high unionization and high skill intensity. The Labor Contract Law significantly reduces the wage elasticity of labor demand, especially in highly unionized and skill-intensive industries. However, this effect is less significant in globalized industries and female-employee-intensive industries. Overall, our results emphasize the important role of China's Labor Contract Law in improving employment protection, and substantial variations in the impact of labor law reform across different firms, regions, and industries.