Official inspection, educational threshold and employment goal

Abstract

Recent study focus on the government intervention to firm operation in emerging markets. Based on the hand collected unique data of official inspection to the Chinese listed firms during 2006–2016, this paper show that under the constraints of official employment aim, enterprises will adopt an employment strategy that reduces the educational threshold and increases employees. This paper firstly builds an employment aim function according to the labor model proposed by Helpman (2010). It proves that the function has restrained properties, which make up for the lack of proof of properties methods that were put forward by previous literatures. Furthermore, the empirical findings show that the Chinese officials visit the corporation frequently. Official visits can increase the number of employees, especially for employees with low educational level, decreasing average degree. This relation is much stronger in high employment aim province. The employment effect of government officials’ inspections is more pronounced when the average academic degree is below a certain threshold.