Rising Labor Costs Research Articles

A Study of Clothing Industry Competitiveness with Porter’s Five Force Approach in Kabupaten Agam Central Industry (A Preliminary Study of Ampek Angkek, Banuhampu, Sungai Puar)

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The effects of rising labour costs on global supply chains: the case of China’s cotton yarn industry

ABSTRACTRapid economic growth in China and India has resulted in rapidly rising labour costs in those countries. In this study a Muth-type model is used to assess the potential effects of this development on global supply chains using China’s cotton yarn industry as a case study. The model considers i) product differentiation at the yarn level; ii) imperfect competition in the markets for cotton yarn and raw cotton fibre, iii) input substitution between raw cotton fibre, labour, and capital; and iv) offsetting increases in the demand for cotton yarn caused by rising consumer income. Results suggest the effects of rising labour costs on the supply chain are modest, and easily swamped or obscured by the effects of rising income. Increases in industry market power (both oligopoly and oligopsony) have the same effect on the supply chain as increases in labour costs, raising prices to consumers of cotton yarn, and lowering prices to input suppliers, including foreign suppliers of raw cotton fibre. The combined effects of increases in labour costs and income have increased the factor shares for labour and to a lesser extent capital at the expense of raw cotton fibre.

Rising labour cost, environmental regulation and manufacturing restructuring of Chinese cities

By expanding the traditional shift-share analysis into a causal test, this paper decomposes the growth of the urban manufacturing industry into composition effect and competition effect to measure the rationalization and advancement of the manufacturing structure. After deriving an equilibrium model, we use the China's industrial enterprises data and the panel dataset of China's prefectural or higher-level cities to examine the effects of labour costs and environmental regulations on the manufacturing structure. The econometric results show that the rationalization of China's urban industry is much greater than the economic growth of the industry. The rapid growth of labour costs is not conducive to employment growth and competitiveness. The "innovation compensation" effect of environmental regulations is not enough to make up for the "follow the cost" effect. Labour costs and environmental regulations have synergistic effects on economic growth and manufacturing restructuring.

Investigation of Global Supply Chain Network Redesign

Many Japanese manufacturing companies are actively producing, selling, and trading through their overseas bases. Former Japanese companies designed strategies based on offshoring; that is, creating a global supply chain in which they set up production bases abroad to benefit from the cheap labor costs and rising demand in emerging countries. This strategy was instrumental in low-cost and competitive manufacturing. However, in recent years, there has been a change in the environment surrounding the supply chain, with rising labor costs in China, quality problems, and fluctuating exchange rates. In addition, due to the rising sophistication of consumer demand and the advancement of technology, among other factors, Japanese firms had to relocate their production bases. Thus, reshoring, by which the manufacturing industry returns to the domestic market, and nearshoring, by which the production base shifts to neighboring countries, are regarded as extremely important strategies. This study, which aims to support the determination of manufacturing allocation by multinational companies, proposes a global supply chain model consisting of offshoring, reshoring, and nearshoring. Moreover, we evaluate the influence of our variables on after-tax profit. Through simulated numerical experiments, we indicate both the strengths and weakness of each strategy.

A meta-network-based risk evaluation and control method for industrialized building construction projects

Construction methods in developing countries such as China are gradually industrializing due to rising labor costs, new techniques, tools, procedures and management methods. This makes it essential to develop new risk evaluation and control methods. Previous research seems to ignore the risk management of the application of new construction technologies and procedures. The identification of risk mechanisms is unclear, leading to a lack of clear guidance for risk avoidance and control. This paper describes a network model based on meta-network analysis of project objectives, risk events, risk factors and stakeholders in the construction process of building industrialization. According to ISO 31000, the main processes of risk management in the model has three parts: risk identification, risk analysis and evaluation, and risk treatment and control. Risk factors are identified from previous literature and site investigation, and the indirect impact on project objectives is analyzed and calculated with the networks in the meta-network. The order of importance is evaluated and used as the foundation of risk treatment and control. The analysis of the crucial risk factors makes it possible to identify the stakeholders who influence them, leading to suggestions for relevant control strategies. A residential building construction project in South China that uses the building industrialization construction system serves as a case study to verify the feasibility and applicability of the risk management system. Results show that critical risk factors are construction-related factors and design-related factors. The water and electricity engineers, the project manager, the project secretary, the field engineer, the project supervisor and the main contractor engineer have a significant influence on the risk factors. A stakeholder supervision system with targeted risk control strategies is proposed.

The Illusive Quest for Structural Transformation in Africa: Will China Make a Difference?

Despite various attempts since independence and the growing economic engagement between China and Africa in the last two decades, structural transformation in Africa has remained elusive. In the last six decades, and unlike China and East Asian countries, African countries failed to successfully transform their economies and thus upgrade their industrial capabilities to move up the ladder of value addition. There is, however, renewed efforts by African countries to industrialise as one of the ways to structurally transform their economies. African countries should ‘leverage their backwardness’ to attract industries and technologies that are consistent with their comparative advantages (Lin, 2018). Indeed, there appears to be growing interest in Africa from the Chinese labour-intensive manufacturing, who see Africa as a low cost production region, especially given the rising labour costs in China. With clear strategic policy direction, African countries can take advantage of the imminent relocation of a substantial share of China’s 85 million manufacturing jobs. This is not a foregone conclusion, since other regions are also trying to exploit this opportunity, and hence requiring African countries to solidify their competitive advantage for the imminent relocation. The studies, in this issue, while cautiously optimistic about the potential positive contribution of China for Africa’s structural transformation, underscore that such success is conditional on African capability and informed strategic policy making and implementation in a pragmatic manner.

Economic Transition and Changing Location of Manufacturing Industry in China: A Study of the Yangtze River Delta

Industrial restructuring is widely considered an important force in regional economic growth and sustainable development. With increased globalization and economic transition, a dramatic industrial restructuring has been taking place in China. Applying geographically weighted shift-share model (GW-SSM) and geographically and temporally weighted regression model (GTWR), we analyze (re)location dynamics and determinants of the manufacturing industry in the Yangtze River Delta (YRD) from 1999 to 2013, with particular attention to the implications of economic transition and institutional restructuring. We find that high-tech and capital-intensive manufacturing industries agglomerated in coastal cities, while labor-intensive and resource-based sectors have become spatially more dispersed to peripheral areas. We also find that the development of service and high-tech industries, rising labor costs, and more strict environmental regulations have facilitated the geographic dispersion of labor- and pollution-intensive industries. Moreover, regions with advantages in intermediate goods, preferential policies, and urbanization economies are attractive to capital- and technology-intensive manufacturing industries. Our research suggests that development policies should be tailored to specific regions to promote local production and innovative networks and make manufacturing industries more competitive.

A Study on Evaluating Competitiveness of China’s Inland Ports

1970년대 후반부터 시작된 개방정책에 힘입어 중국은 빠른 경제성장을 이룩해 왔으며, 이는 연안지역의 수출증대에 기인한 바 크다. 근래 연안지역에서 인건비 상승 등으로 인해 수출의 원동력이 중국의 중서부와 동북부 내륙지역으로 이동하면서 중국경제발전에서 내륙지역의 역할이 증대되고 있다. 그러나 내륙지역에서 해외로의 수출은 추가적인 물류비의 증가를 이어지게 되는데 이를 완화할 수 있는 방안으로 중국은 2000년대 초반부터 내륙항 건설을 추진하여왔다. 항만에서의 통관, 검수, 검역 등의 수출입 업무와 화물의 혼재와 같은 기능을 내륙항에 부여함으로써 수출입 물류비용과 시간을 줄일 수 있다. 따라서 내륙지역의 수출 증대와 더불어 내륙항의 기능, 규모, 역할 등은 더욱 확대될 것으로 예상된다. 본 연구는 중국 내륙항의 각종 지표를 활용하여 경쟁력(잠재력)을 평가하고 현재의 물동량(성과)과 비교함으로써 향후 개별 내륙항의 발전 가능성을 예측하며, 이를 토대로 우리나라 물류업체들의 중국 진출에 대한 시사점을 제시하는 데 있다. AHP 분석결과 내륙항 경쟁력의 결정요인으로 경제 및 물동량, 지리적 요인, 인프라 요인, 정책 및 제도적 요인의 순으로 중요성이 높은 것으로 나타났다. 이들 요인의 가중치를 개별 내륙항 실적치를 이용해 산정한 결과 경쟁력과 현재 성과 면에서 높은 내륙항은 칭다오, 우루무치, 시안으로 선정되었으며, 향후 발전 가능성이 높으나 현재 성과(물동량)는 낮은 내륙항은 베이징, 청두, 선양, 스좌좡, 쿤밍, 뤄양, 정저우로 나타나 이들 내륙항의 발전이 예상된다. 우리나라의 항만당국, 물류기업, 정부는 중국 내륙 지역으로 물류의 중심점이 이동하고, 내륙의 역할이 증가될 것에 대비하여 잠재력이 높은 내륙지역과 내륙항에 대한 마케팅 활동, 투자, 협력 등의 정책적 방안을 수립해 대응해 나가야 할 것이다.Since the late 1970s, China s rapid economic growth has been driven by China s opening policy, which is largely due to export growth in the coastal region. The role of the inland area such as Mid-east and Northeast regions in China is increasing as the driving force of exports moves to the inland area due to rising labor costs in coastal areas. However, exporting from the inland area to overseas is hindered by the additional logistics costs. As a way to overcome this, China has constructed inland ports since early 2000s. The inland port can reduce import and export logistics costs and time by providing functions such as customs clearance, inspection and quarantine, and mixing of cargoes with inland port. Therefore, it is expected that the function, size, and role of inland ports will be further expanded along with growth of exports. The purpose of this study is to estimate their development potential by evaluating the competitiveness(potential) of China s inland ports and comparing it with the current cargo volume(performance), and then to suggest implications for Korean logistics companies entry into China. As a result of AHP analysis, economic and trade volume, geographical factors, infrastructure, policy and institutional factors were selected as important determinant factor in evaluating inland port’s competitiveness. An individual inland port s performance is multiplied the weight of these factors calculated by a AHP in order to evaluate the potential competitiveness of inland ports. As a result of comparing the potential competitiveness and current cargo handling volume, Qingdao, Urumqi and Xi an were selected as high in terms of both competitiveness and current performance. Inland port, which has high in competitive potential but low at the level of current performance is Beijing, Chengdu, Shenyang, Shiazhuang, Kunming, Luoyang and Zhengzhou. Korea s port authorities, logistics companies and governments should undertake active marketing activities, investment and cooperation with inland ports located in this region, while moving the logistics center from coastal to inland areas in China.

EFFECT OF MECHANICAL HARVESTING ON YIELD AND QUALITY OF TEA IN TANZANIA

SUMMARYHand plucking of tea is labour intensive, and with rising labour costs mechanical harvesting (MH) is of increasing interest. However, effects of MH on yield and quality of tea remain unclear. We harvested two tea clones for eight years with a small, wheeled machine, to investigate effects of different cutting heights on yield and quality. The harvest interval for machine plots was 40% longer than for hand plucking in the first three years and 100% longer thereafter. The yield response, relative to hand plucking, depended on cutting height. Provided that increase in bush height (table rise) was 6 cm per year or less, yields were 15–21% higher than with hand plucking and increased yield was still being maintained after eight years. The increase in yield appeared to be mainly attributable to the longer harvest interval for machine plots, so that larger shoots were harvested. There was no increase in the number of shoots harvested per year, despite more intensive plucking with the machine. In less intensively harvested plots, where table rise was 11–14 cm per year, yield was reduced compared to hand plucking, and shoot number was nearly 30% lower. Dry matter production was greatest under the least intensive harvesting, but greater intensity gave higher harvest index and yield. In plots with no table rise, but not in other plots, a large amount of die-back of plucked points was observed. This may indicate source limitation of shoot numbers. We conclude that, with an extended harvest interval and careful management of cutting height, the yield of tea can be maintained under MH. There was a reduction in green leaf quality, with coarser shoots and increased mature leaf, but a limited number of taster evaluations of quality of the black tea showed significant differences for only one clone.

Inter-provincial Differences in Rice Multi-cropping Changes in Main Double-cropping Rice Area in China: Evidence from Provinces and Households

Since the early 1980s, the multi-cropping index for rice has decreased significantly in main double-cropping rice area in China, which is the primary double-cropping rice (DCR) production area. This decline may bring challenges to food security in China because rice is the staple food for more than 60% of the Chinese population. It has been generally recognized that rapidly rising labor costs due to economic growth and urbanization in China is the key driving force of the ‘double-to-single’ rice cropping system adaption. However, not all provinces have shown a dramatic decline in DCR area, and labor costs alone cannot explain this difference. To elucidate the reasons for these inter-provincial distinctions and the dynamics of rice cropping system adaption, we evaluated the influencing factors using provincial panel data from 1980 to 2015. We also used household survey data for empirical analysis to explore the mechanisms driving differences in rice multi-cropping changes. Our results indicated that the eight provinces in the study can be divided into three spatial groups based on the extent of DCR area decline, the rapidly-declining marginal, core, and stable zones. Increasing labor cost due to rapid urbanization was the key driving force of rice cropping system adaption, but the land use dynamic vary hugely among different provinces. These differences between zones were due to the interaction between labor price and accumulated temperature conditions. Therefore, increasing labor costs had the greatest impact in Zhejiang, Anhui, and Hubei, where the accumulated temperature is relatively low and rice multi-cropping index declined dramaticly. However, labor costs had little impact in Guangdong and Guangxi. Differences in accumulated temperature conditions resulted in spatially different labor demands and pressure on households during the busy season. As a result, there have been different profits and rice multi-cropping changes between provinces and zones. Because of these spatial differences, regionally appropriate policies that provide appropriate subsidies for early rice in rapidly-declining marginal zone such as Zhejiang and Hubei should be implemented. In addition, agricultural mechanization and the number of agricultural workers have facilitated double-cropping; therefore, small machinery and agricultural infrastructure construction should be further supported.

Skilling Requirements in Textiles: Technical Training and Its Trainers-Sri Lanka in Perspective

The textile and clothing industry has become very competitive in the world over. There are many players in the industry. The most prominent player is China. Recent statistics reveal that China continue to be the world’s largest textile and clothing producer in 2016 (Textiles outlook, 2017). China’s major export markets are EU, USA and Japan. However, rising labour costs and production costs of China will shift production to lower cost suppliers. This will give South Asia and South-East Asia an opportunity to capitalize in their exports. The question is, can these regions in Asia take this challenge? To overcome the challenges, they must be ready with highly skilled manpower. The Tertiary and Vocational Educational Training system across Asian region must be geared to take this challenge of training the new recruits. Can these countries have adequate numbers of skilled, effective and experienced trainers to train the new recruits? Qualified trainers may be in short supply. Then, how quickly can these trainers be made available for training? Half-baked trainers would turn half-baked workers that will not give right condition to meet the future challenges. A recent study by the author has revealed that there are not enough qualified trainers to impart knowledge and skill for those in the textile and clothing industry in Sri Lanka. This can be the case across Asia. It is time that responsible professionals in the training industry should consider about trainers if they are to launch a massive skilling project to meet requirements of the textile/clothing industry. Skilling the trainers must be a priority. It will be interesting to note that there is a mismatch between trainees and training courses. Also, students are not attracted to training courses. So, there is a concern about who should be trained and are they available?

Rural demographic change, rising wages and the restructuring of Chinese agriculture

PurposeThe purpose of this paper is to identify the effects of recent demographic transition and rising labor costs on agricultural production structure and pattern in China during 1998-2012.Design/methodology/approachThe authors, first, theoretically discuss the effects of changing relative input prices due to rising labor cost on producers’ decisions regarding input mix (substitution effect), output level, and product quality (output effect). A logarithmic mean Divisia index decomposition method is then applied to empirically identify these effects at aggregated levels, followed by an analysis based on the visualization of land use indicators on changing cropping patterns across Chinese provinces.FindingsThe authors find that tightened effective agricultural labor supply and rises in rural labor costs are associated with divergent changes in input mixes and output choices across products. Producers of land-intensive products focusing more on input mix adjustment, while those of labor-intensive products seem to more likely to adjust output choices. Producers’ adaption strategies also varied across Chinese provinces due to natural conditions, leading to shifts and concentrations in the regional distribution of agricultural products, with lower-value bulk products concentrating in the plain areas, whereas higher-value horticulture products increasingly prevailing in sloped areas.Originality/valueThis paper illustrates how adjustments in input mixes and output choice in Chinese agriculture counteracted disadvantages caused by rising labor costs and how such adjustments are product and region specific. Based on these observations, implications regarding further innovations in production technology and institutional arrangements needed within China’s agricultural sector are highlighted in the paper.

A national assessment of the effect of intensive agro-land use practices on nonpoint source pollution using emission scenarios and geo-spatial data.

China's intensive agriculture has led to a broad range of adverse impacts upon ecosystems and thereby caused environmental quality degradation. One of the fundamental problems that face land managers when dealing with agricultural nonpoint source (NPS) pollution is to quantitatively assess the NPS pollution loads from different sources at a national scale. In this study, export scenarios and geo-spatial data were used to calculate the agricultural NPS pollution loads of nutrient, pesticide, plastic film residue, and crop straw burning in China. The results provided the comprehensive and baseline knowledge of agricultural NPS pollution from China's arable farming system in 2014. First, the nitrogen (N) and phosphorus (P) emission loads to water environment were estimated to be 1.44Tg N and 0.06Tg P, respectively. East and south China showed the highest load intensities of nutrient release to aquatic system. Second, the amount of pesticide loss to water of seven pesticides that are widely used in China was estimated to be 30.04tons (active ingredient (ai)). Acetochlor was the major source of pesticide loss to water, contributing 77.65% to the total loss. The environmental impacts of pesticide usage in east and south China were higher than other parts. Third, 19.75% of the plastic film application resided in arable soils. It contributed a lot to soil phthalate ester (PAE) contamination. Fourth, 14.11% of straw produce were burnt in situ, most occurring in May to July (post-winter wheat harvest) in North China Plain and October to November (post-rice harvest days) in southeast China. All the above agricultural NPS pollution loadings were unevenly distributed across China. The spatial correlations between pollution loads at land unit scale were also estimated. Rising labor cost in rural China might be a possible explanation for the general positive correlations of the NPS pollution loads. It also indicated a co-occurred higher NPS pollution loads and a higher human exposure risk in eastern regions. Results from this research might provide full-scale information on the status and spatial variation of various agricultural NPS pollution loads for policy makers to control the NPS pollution in China.

Strategi Pengembangan Usaha Produk Tekstil di PT Priangan Sentosa Tasikmalaya, Jawa Barat

Textile product industry has an important role in the economy Tasikmalaya City, because contributing 42,1% to manufacturing industry. Manufacturing industry contributing 14.6% to the GRDP Tasikmalaya City. The problem faced by the industry of textile products is the increase in raw material prices, rising labor costs, the entry of lower-priced imported products, intense competition with similar companies and reduced orders from buyers. In an effort to maintain the continuity of their business, it is necessary to develop a strategy of business development. The purpose of this study was to analyze the internal and external conditions, the formulation of strategic alternatives, prioritization and selection of strategic business development strategy PT PS. Results Internal Factor Evaluation (2.692) and External Factor Evaluation (2.334) puts the company's position in Cells V (companies should be preserved and maintained through market penetration strategies and product development. Methods of SWOT result formulation of strategies: (1) take advantage of competition among suppliers to obtain raw materials at the lowest offer price, (2) Increasing production by expanding the partnership, (3) promotion, (4) expand the marketing area, (5) maintain the quality of raw material, (6) improve product quality, (7) makes dyeing, (8) machine maintenance and machine engineering (9) labor skills training. Quantitative Strategic Planning Matrix (QSPM) puts the promotion strategy as a priority. Implications of managerial are: (1) Aspects of production need to be supported by increased economies of scale by improving partnerships with other entrepreneurs, supplier selection, take advantage of the effects of learning and experience, (2) Aspects of HR need to increase the skills of workers, (3) Financial Aspects through cash payments from buyers and increased allocation of marketing costs, (4) marketing aspect through targeting the wholesale level market, expand marketing and mainte-nance of customer loyalty and (5) Aspects of technology through the restructuring of the machine.

Applying New Technologies to Transform Blueberry Harvesting

The growth of the blueberry industry in the past three decades has been remarkably robust. However, a labor shortage for hand harvesting, increasingly higher labor costs, and low harvest efficiencies are becoming bottlenecks for sustainable development of the fresh market blueberry production. In this study, we evaluated semi-mechanical harvesting systems consisting of a harvest-aid platform with soft fruit catching surfaces that collected the fruit detached by portable, hand-held, pneumatic shakers. The softer fruit catching surfaces were not glued to the hard sub-surfaces of the harvest-aid platform, but suspended over them. Also, the ergonomic aspect of operating powered harvesting equipment was determined. The pneumatic shakers removed 3.5 to 15 times more fruit (g/min) than by hand. Soft fruit catching surfaces reduced impact force and bruise damage. Fruit firmness was higher in fruit harvested by hand compared to that by pneumatic shakers in some cultivars. The bruise area was less than 8% in fruit harvested by hand and with semi-mechanical harvesting system. The percentage of blue, packable fruit harvested by pneumatic shakers comprised as much as 90% of the total, but less than that of hand-harvested fruit. The ergonomic analysis by electromyography showed that muscle strain in the back, shoulders, and forearms was low in workers operating the light-weight, pneumatic shakers that were tethered to the platform with a tool balancer. The new harvesting method can reduce the labor requirement to about 100 hour/hectare/year and help to mitigate the rising labor cost and shortage of workers for harvesting fresh-market quality blueberries.

The long-term impact of service empathy and responsiveness on customer satisfaction and profitability: a longitudinal investigation in a healthcare context

Rising labor costs in healthcare industries have led many firms to underinvest in service empathy and responsiveness by downsizing staffing levels. Although such a strategy may help contain operating costs and improve productivity in the short run, its sustainability and long-term effect remain unclear, as the literature offers competing explanations of such an effect on customer satisfaction and overall profitability. Using 24 quarters of longitudinal patient satisfaction data and archival financial data from 25 clinical units in a large healthcare organization, this study examines how empathy and responsiveness influence profitability over time. The findings show that downgrading empathy and responsiveness allows firms to lower costs, resulting in immediate productivity benefits; however, this strategy has an enduring negative effect on customer satisfaction and ultimately hurts profitability in the long run.

From ‘Labour Dividend’ to ‘Robot Dividend’: Technological Change and Workers’ Power in South China

China became the world’s largest market for industrial robots in 2013. The robotic revolution gained pace and occurred after the 2008 financial crisis as many export-oriented firms coped with dwindling orders, rising labour costs and growing concerns over occupational safety. Unlike workers in the Global North who experienced automation in the 1960s and 1970s against a backdrop of strong union activism, whether semi-proletarian peasant-workers in China ultimately enjoy the ‘beneficial’ effects of industrial upgrading is questionable. However, very little social science research has investigated how automation, in light of the negative consequences of unemployment and deskilling, can continue to be advanced. Drawing on Beverley Silver’s concept of workers’ power, this article explores how workers’ marketplace and workplace bargaining power interfaces with technological change. The Chinese case may offer important lessons to those in the under-technologized South seeking to conceptualize strategies for social change in the context of industrial upgrading.

Improving Supplier Compliance Through Joint and Shared Audits

Improving Supplier Compliance Through Joint and Shared Audits Felipe Caro Prashant Chintapalli Kumar Rajaram Christopher S. Tang UCLA Anderson School of Management ∗ October 22, 2015 Abstract When suppliers (i.e., contract manufacturers) fail to comply with environmental or safety regulations, several non-governmental agencies and consumer activists put pressure on the buy- ers (customers) to take necessary actions to improve supplier compliance. Due to concerns over negative image and public boycotts, many buyers are conducting costly audits to improve sup- plier compliance. By considering a common practice that calls for independent audits (i.e., each buyer performs its own audit) as a benchmark, we examine the implications of two new audit mechanisms in this paper. The first mechanism is called the joint audit mechanism un- der which buyers conduct joint audits by sharing the joint audit cost and impose a collective penalty if the supplier fails their joint audit. The second mechanism is referred to as the shared audit mechanism under which each buyer conducts its own audit independently but shares its audit report with the other buyer. By sharing the audit reports, the buyers impose a collective penalty on the supplier if the supplier fails any one of the audits. Using a game-theoretic model with 2 buyers and 1 supplier, our analysis reveals that the joint audit mechanism is beneficial in two important ways. It can make the supplier increase its compliance level in equilibrium. Also, when the audit cost is below a certain threshold, the joint audit mechanism can increase the supply chain profit so that it is Pareto-improving. Moreover, we find that the shared audit mechanism is beneficial in a similar manner when the audit cost lies within a certain range. Ultimately, our analysis reveals that joint audits can be Pareto-improving when the buyer’s audit cost is low, shared audits can be Pareto-improving when the buyer’s cost is medium, and independent audits turn out to a practical mechanism when the buyer’s audit cost is high. Keywords: Supply Chain Risk, Supplier Compliance, Audits, Collective Penalty Introduction Rising labor costs in the West have encouraged more firms to gradually source their products from other low-cost countries in the East. As more contract manufacturers compete for orders at lower price in these countries many factory owners cut corners to reduce their upfront investments and operating costs. In some cases, factory owners may even sacrifice product or process safety by not complying with product regulations or environmental and work safety codes. In terms of product safety violations, Tang and Babich (2014) report that some Chinese manufacturers Acknowledgements: The authors would like to thank Professors Gregory Leblanc and Terry Taylor of University of California, Berkeley for discussing the joint audit mechanism and the notion of collective penalty with one of the authors.

Mechanization outsourcing clusters and division of labor in Chinese agriculture

Despite small landholdings, a high degree of land fragmentation, and rising labor costs, agricultural production in China has steadily increased. If one treats the farm household as the unit of analysis, it would be difficult to explain the conundrum. When seeing agricultural production from the lens of the division of labor, the puzzle can be easily solved. In response to rising labor costs, farmers outsource some power-intensive stages of production, such as harvesting, to specialized mechanization service providers, which are often clustered in a few counties and travel throughout the country to provide harvesting services at competitive prices. Through such an arrangement, smallholder farmers can stay viable in agricultural production.

Do Rising Labour Costs Drive Innovation in Enterprises? Propensity Score Matching Evidence from Chinese Firms

AbstractThis paper uses a monopolistic competition model and propensity score matching (PSM) with Chinese firm‐level data to determine whether rising labour costs drive innovation within enterprises. The results indicate that rising wages do drive firms to invest more in R&D and use more capital to substitute for labour to minimize costs, which improves total factor productivity. The results are verified by several robustness tests.