Seminar (Dept. of Accounting)

Title：Urban rail transit and labor cost stickiness: Causal evidence on the adjustment cost hypothesis

Speaker：Wu wuqing, Professor, Renmin Business School, Renmin University of China

Time：10:00-11:30, September 25th, 2024 (Wednesday)

Venue：Room 706, Mingde Business Building

Language：Chinese & English

ABSTRACT:

Exploiting the construction of urban rail transit (URT) stations in China, which provides employees with a faster, on-time commute, we examine the effect of adjustment costs on labor cost stickiness. We find that the construction of URT stations significantly reduces firms’ labor cost stickiness, that is, compared with other firms, those that were built URT stations around their headquarters cause a 62.9% reduction in labor cost stickiness. The effect is more pronounced for the affected firms with less labor supply, more labor demand, and poorer commuting environments. We further document that the construction of URT stations declines the stickiness of the number of employees rather than the stickiness of the wages of employee, resulting an increase in firms’ labor economic benefits from 4.5% to 6.5%. These findings indicate that the management not only considers the adjustment cost associated with the current resource reduction, but also the future adjustment cost when the firm expands its resources.