This paper examines the effect of labor outsourcing on corporate human capital investment.
Using a large sample of Chinese listed firms from 2015 to 2024, this paper uses the job training expense to measure corporate human capital investment and uses a dummy variable to indicate whether a firm engages in labor outsourcing in a given year. To establish a credible causal relationship between labor outsourcing and corporate human capital investment, I apply propensity score matching and employ the two-stage least squares method.
I find that labor outsourcing increases corporate human capital investment. This finding is robust to a battery of sensitivity tests and is more attenuated for firms facing intense product market competition, for firms with severe financial constraints, and for firms with higher managerial myopia.
This paper provides new insights into the role of labor outsourcing by incorporating human capital investment in a developing country context.
