Population mobility and employee social responsibility: evidence from hukou reform in China

Abstract

ABSTRACT Population mobility may have a profound impact on the labor market, affecting firms’ employment decisions. We consider hukou reform in China as a quasi-natural experiment in identifying the effects of population mobility on employee-related corporate social responsibility (employee social responsibility, or ESR). The empirical results show that hukou reform prompts firms to invest more in ESR activities, particularly in ESR activities with weak externalities and in regions with a smaller labor market size. Cross-sectional tests suggest that the effects of hukou reform on firms’ ESR investment are stronger for more financially constrained firms and those in high-tech industries, and in more competitive regions. The findings have important practical implications for employment strategies that firms should adopt when the labor market becomes more competitive.