The purpose of this study uses data of companies listed on the Shanghai and Shenzhen A-shares between 2012 and 2021 and uses the staggered difference-in-differences (DID) causal inference method to evaluate the impact and mechanisms of China’s social credit system construction (CSCSC) on labor employment decisions.
This scenario conforms to two key elements of staggered DID. First, micro-enterprises were not uniformly affected by policy shocks over time (2017 with 12 cities, 2019 with 16 cities and 2021 with 34 cities). Second, since the onset of policy impacts, there has been no instance of micro-enterprises exiting the pilot policies, meaning there was no occurrence of policy withdrawal or reversal.
The findings of this study are as follows: first, the pilot policy for CSCSC has resulted in an approximate increase of 3.10% in enterprise labor employment. Second, the CSCSC has facilitated the expansion of labor employment by augmenting the scale of debt financing, diminishing the cost of debt financing and curtailing the supply of commercial credit. Furthermore, heterogeneity analysis demonstrated that the pilot policy for CSCSC has a more pronounced effect on enhancing enterprise labor employment when the labor market supply is abundant and the degree of regional marketization and the relationship between government and market are both relatively low, particularly for small-scale, non-state-owned enterprises with weak profitability.
Chinese listed companies constitute only a subset of the firms affected by the credit policy. An analysis of how the social-credit-system reform influences employment structure within this sector cannot, by definition, demonstrate that the same effects apply to unlisted firms. Future research could usefully examine whether, and the extent to which, China’s social-credit-system reform and related policy measures influence the evolution of employment structures.
Given that the construction of the social credit system has been shown to significantly increase the scale of enterprise labor employment, policymakers are advised to consider the continued expansion of this system to foster the growth and development of additional enterprises. Considering that China’s central regions derive greater benefits from the social credit system, it is imperative that the state intensifies its support for these areas, including measures such as fiscal and tax incentives, to promote balanced regional development.
The policymaker should take into account the positive impacts of the social credit system construction on different regions and types of enterprises, and accordingly adjust and refine related policies and measures to fully leverage the role of the social credit system in promoting economic development and corporate growth. Employment is recognized as the paramount aspect of people’s welfare and acknowledged as the most fundamental foundation of economic growth.
The marginal contribution of this study is mainly reflected in the following three aspects. First, it supplements the literature on the impact of social credit on macro-employment behavior. Second, this study innovatively explores the impact of the social credit system construction on labor employment decisions from a human capital perspective. Finally, the limitations of existing research have been addressed by this study, contributing to an enhanced understanding of the effects of social credit system construction on labor employment decisions in pilot area enterprises.
