Can government procurement increase the labor share? Evidence from China

Xiaofeng Liu; Nuo Shi; Gaoliang Tian; Ziyang Zhang

doi:10.1016/j.cjar.2025.100461

Can government procurement increase the labor share? Evidence from China

Xiaofeng Liu
, Nuo Shi^*
, Gaoliang Tian
, Ziyang Zhang

^*Corresponding author for this work

College of Business

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

1 Citation (Scopus)

20 Downloads (CityUHK Scholars)

Abstract

This paper examines the effect of government procurement on the firm-level labor share in China. Using manually collected local government contract data matched with A-share non-financial listed firms from 2015 to 2023, we find that firms receiving government procurement contracts experience increased labor shares. Government procurement enhances business stability and encourages regulatory and non-regulatory compliance, facilitating the allocation of economic gains to labor. This positive effect is primarily driven by non-SOEs and is pronounced among labor-intensive manufacturing firms. We also show that government procurement effectively promotes income equality and improves overall employee welfare. Our findings highlight the redistributive role of government procurement and the importance of contract design that aligns firm incentives with social objectives in emerging markets. © 2025 The Authors. Published by Elsevier B.V. on behalf of Sun Yat-sen University.

Original language	English
Article number	100461
Number of pages	23
Journal	China Journal of Accounting Research
Volume	19
Issue number	1
Online published	5 Jan 2026
DOIs	https://doi.org/10.1016/j.cjar.2025.100461
Publication status	Published - Mar 2026

Funding

Gaoliang Tian gratefully acknowledges the financial support from the National Natural Science Foundation of China (Grant No. 71672141), the National Social Science Foundation of China (Grant No. 21FGLB006) and the Humanities and Social Science Foundation of the Ministry of Education of China (Grant No. 21YJA630082).

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 1 No Poverty
SDG 9 Industry, Innovation, and Infrastructure

Research Keywords

Government procurement contract
Labor share
Business risk
Public governance
Income equality

Publisher's Copyright Statement

This full text is made available under CC-BY-NC-ND 4.0. https://creativecommons.org/licenses/by-nc-nd/4.0/

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title = "Can government procurement increase the labor share? Evidence from China",

abstract = "This paper examines the effect of government procurement on the firm-level labor share in China. Using manually collected local government contract data matched with A-share non-financial listed firms from 2015 to 2023, we find that firms receiving government procurement contracts experience increased labor shares. Government procurement enhances business stability and encourages regulatory and non-regulatory compliance, facilitating the allocation of economic gains to labor. This positive effect is primarily driven by non-SOEs and is pronounced among labor-intensive manufacturing firms. We also show that government procurement effectively promotes income equality and improves overall employee welfare. Our findings highlight the redistributive role of government procurement and the importance of contract design that aligns firm incentives with social objectives in emerging markets. {\textcopyright} 2025 The Authors. Published by Elsevier B.V. on behalf of Sun Yat-sen University.",

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N2 - This paper examines the effect of government procurement on the firm-level labor share in China. Using manually collected local government contract data matched with A-share non-financial listed firms from 2015 to 2023, we find that firms receiving government procurement contracts experience increased labor shares. Government procurement enhances business stability and encourages regulatory and non-regulatory compliance, facilitating the allocation of economic gains to labor. This positive effect is primarily driven by non-SOEs and is pronounced among labor-intensive manufacturing firms. We also show that government procurement effectively promotes income equality and improves overall employee welfare. Our findings highlight the redistributive role of government procurement and the importance of contract design that aligns firm incentives with social objectives in emerging markets. © 2025 The Authors. Published by Elsevier B.V. on behalf of Sun Yat-sen University.

AB - This paper examines the effect of government procurement on the firm-level labor share in China. Using manually collected local government contract data matched with A-share non-financial listed firms from 2015 to 2023, we find that firms receiving government procurement contracts experience increased labor shares. Government procurement enhances business stability and encourages regulatory and non-regulatory compliance, facilitating the allocation of economic gains to labor. This positive effect is primarily driven by non-SOEs and is pronounced among labor-intensive manufacturing firms. We also show that government procurement effectively promotes income equality and improves overall employee welfare. Our findings highlight the redistributive role of government procurement and the importance of contract design that aligns firm incentives with social objectives in emerging markets. © 2025 The Authors. Published by Elsevier B.V. on behalf of Sun Yat-sen University.

KW - Government procurement contract

KW - Labor share

KW - Business risk

KW - Public governance

KW - Income equality

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DO - 10.1016/j.cjar.2025.100461

M3 - RGC 21 - Publication in refereed journal

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VL - 19

JO - China Journal of Accounting Research

JF - China Journal of Accounting Research

IS - 1

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ER -

Can government procurement increase the labor share? Evidence from China

Abstract

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UN SDGs

Research Keywords

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