Employee allocation efficiency in the context of the digital economy: Evidence from “Broadband China” demonstration cities

Abstract

This study examines the impact of the “Broadband China” policy on the efficiency of employee allocation in firms, with an emphasis on the role of digital economy development. Utilizing data from Chinese listed companies from 2011 to 2019 and city-level statistics from the China City Statistical Yearbooks, we employ rigorous econometric methodologies, including Difference-in-Differences and multi-period multi-entity Difference-in-Differences, to analyze the policy effects. Our findings suggest that “Broadband China” demonstration cities significantly reduce staff redundancy and enhance the efficiency of employee allocation within firms. This effect is attributed to the stimulation of entrepreneurial activity and the promotion of digital transformation driven by the demonstration city pilot program. Furthermore, the policy’s effectiveness is found to vary based on city location, workforce scale, the nature of enterprise ownership, and growth stage. Importantly, the improved efficiency of employee allocation resulting from the demonstration cities leads to favorable economic outcomes, augmenting total factor productivity for firms. In conclusion, this research highlights the crucial role of digital economy policies in optimizing the structure of human resources within firms, emphasizing the importance of fostering digital transformation to achieve efficient talent allocation and enhance production efficiency.