How do zombie firms affect labor mobility: city-level empirical evidence from China

Zombie firms hinder the healthy development of the economy and society and may also affect labor mobility. Using microdata from the 2000–2015 population censuses and the Chinese industrial enterprises database from 1998 to 2013, this paper empirically examines the impact of zombie firms on labor mobility and the underlying mechanisms at the city level. The findings reveal that an increase in the proportion of zombie firms in a city significantly suppresses labor inflows and accelerates labor outflows. Mechanism analysis shows that zombie firms affect labor mobility by solidifying the industrial structure, obstructing the entry of new firms, and exacerbating environmental pollution. Further research indicates that the impact of zombie firms exhibits individual heterogeneity, with low-skilled and younger and middle-aged workers being more susceptible to the negative effects of zombie firms. This study not only provides new literature and empirical evidence on the impact of zombie firms on the labor market but also offers important insights for local governments on attracting labor and preventing labor loss by addressing the issue of zombie firms.