China’s Labour Contract Law and Labour Costs of Production

Abstract

The promulgation of the Labour Contract Law in China has aroused heated debate about the financial burden of the new labour costs for firms. However, based on a data set collected in Guangdong Province in southern China, the empirical findings suggest that, on average, the increase in labour costs per capita in the sample firms due to the effects of the law ranges between 2.54 percent and 4.90 percent, which seems to be economically insignificant.