Social Mobility and Firms’ Total Factor Productivity: Evidence from China

Round 1

Reviewer 1 Report

This is an interesting study. The Authors tried to answer the question what role does the openness of social structure play in promoting total factor productivity? This is an up-to-date problem for industrial development.

As a method of resolving the scientific problem, quantitative approach was selected. Regression models wer built and heterogenity tests were performed. As conclusions, the dependencies between openness of social straucture and productivity were identified.

Suggestions for correction:

- What was the purpose of the paper? I couldn't find.

- Significance (Table 2 and following) is not a %, but a number: 0.01, 0.05 etc.

- There is no results discussion with other publications in this research field. Please fill this gap.

Author Response

Dear Reviewers:

First of all, please allow us to take this opportunity to express our heartfelt thanks to you for taking time out from your busy schedule to review this manuscript. You have provided us with constructive comments and suggestions, which are of great help for us to further improve this manuscript. We have carefully reviewed and revised the manuscript according to your valuable comments and suggestions. Here, we explain the revised work in detail below and provide the point-by-point responses to the reviewers’ comments.

Response to the reviewers #1:

This is an interesting study. The Authors tried to answer the question what role does the openness of social structure play in promoting total factor productivity? This is an up-to-date problem for industrial development.

As a method of resolving the scientific problem, quantitative approach was selected. Regression models were built and heterogenity tests were performed. As conclusions, the dependencies between openness of social straucture and productivity were identified.

Q1: What was the purpose of the paper? I couldn't find.

Response: Many thanks for your constructive suggestions. In the revised manuscript we add the following discussions:

“With the gradual disappearance of China's demographic dividend, economic growth needs to shift from relying on capital and labor input to relying on increasing total factor productivity. By optimizing the incentive mechanism, enhancing the vitality of microcosmic body is helpful to improve firms’ total factor productivity. From the perspective of policy implications, our research highlights the importance of social mobility in enhancing total factor productivity and promoting sustainable economic development. ”

Please see the fourth paragraph of Section 1 (Introduction) in the revised manuscript for more details.

Q2: Significance (Table 2 and following) is not a %, but a number: 0.01, 0.05 etc.

Response: We thank the reviewer for raising our awareness of this issue. In the revised draft, we make a correction.

Q3: There is no results discussion with other publications in this research field. Please fill this gap.

Response: Many thanks for your constructive suggestions.

First, in Section 3.2.2. (Research design), we present the existing literature on social mobility and list its limitations in measuring social mobility. We also explain why the method proposed by Chetty et al.(2014) can be better used to measure social mobility at the city level.

Second, as we mentioned in Section 1 (Introduction), “the economic outcomes of social mobility, which are closely linked to the social structure, have been confirmed by many studies, and the relationship between enterprise productivity still little known.” Since few studies have examined the impact of social mobility on corporate activities, this paper fills the gap in this research field and provides space for future research.

Reviewer 2 Report

Manuscript title: Social mobility and firms’ total factor productivity: Evidence from China

Thank you for having me review this study. Based on the title of the manuscript, it looks promising and can be an insightful study. However, some critical points need to be clarified and improved by the authors.

Abstract

·        The authors need to add a sentence explaining the proposed methodology.

·        Keywords must be written in alphabetical order

Introduction

·        Paragraph 1 needs references.

·        Jumping logic in lines 73-74. The prior sentence explains the condition of social mobility if at an adequate level, but the next sentence explains production efficiency. The authors need to fix or put some sentences to make it coherent.

·        In lines 82-83, the authors stated that this study follows a prior study that measures social mobility at the city level. The authors need to explain why this study should measure social mobility at the city level.

·        In lines 85-93, do the authors explain the result of the prior study (reference number 23) or the current study?? Because it is strange if the authors mention the result of their current study in the introduction section.

Literature review

Some concepts are not well-explained in the literature review sections. For instance, in line 135, the authors mentioned “upward mobility” without prior explanation related to that concept. In addition, the concept of human capital should be explained in the literature review section rather than in the discussion section.

Methodology

The authors need to explain what kind of statistical tools was employed to test the proposed hypotheses, along with the reasons for employing such a tool.

Policy implications

In the abstract section, the authors confirm that this study is designed to inspire the government to establish related policies according to the findings. However, in the policy implications section, the authors give three policy implications which more normative rather than practical. The authors need to elaborate more in giving suggestions for the policymakers. 

Limitations and future research suggestions

The authors need to add the study limitations and suggestions for future studies.

Author Response

Dear Reviewers:

First of all, please allow us to take this opportunity to express our heartfelt thanks to you for taking time out from your busy schedule to review this manuscript. You have provided us with constructive comments and suggestions, which are of great help for us to further improve this manuscript. We have carefully reviewed and revised the manuscript according to your valuable comments and suggestions. Here, we explain the revised work in detail below and provide the point-by-point responses to the reviewers’ comments.

Response to the reviewers #2:

Thank you for having me review this study. Based on the title of the manuscript, it looks promising and can be an insightful study. However, some critical points need to be clarified and improved by the authors.

Q1: The authors need to add a sentence explaining the proposed methodology. Keywords must be written in alphabetical order.

Response: Following the suggestion by the reviewer, in the revised manuscript we provide supplements and amendments.

Q2: Paragraph 1 needs references. Jumping logic in lines 73-74. The prior sentence explains the condition of social mobility if at an adequate level, but the next sentence explains production efficiency. The authors need to fix or put some sentences to make it coherent. In lines 82-83, the authors stated that this study follows a prior study that measures social mobility at the city level. The authors need to explain why this study should measure social mobility at the city level. In lines 85-93, do the authors explain the result of the prior study (reference number 23) or the current study?? Because it is strange if the authors mention the result of their current study in the introduction section.

Response: Thank you for your comments. We agree that your comments are very insightful and constructive. Therefore, we make the following revisions in the revised manuscript.

First, the authoritative references are added to paragraph 1:

Liboreiro, P. R., Fernandez, R., Garcia, C. The driver of deindustrialization in advanced economies: A hierarchical structural decomposition analysis. Structural Change and Economic Dynamics. 2021, 58, 138-152. http://doi.org/10.1016/j.strueco.2021.04.009

Capello, R., Cerisola, S. Regional reindustrialization patterns and productivity growth in Europe. Regional Studies. 2022. http://doi.org/10.1080/00343404.2022.2050894

Fuentes, R., Mishra, T., Scavia, J., Parhi, M. On optimal long-term relationship between TFP, institutions, and income inequality under embodied technical progress. Structural Change and Economic Dynamics. 2014, 31, 89-100. http://doi.org/10.1016/j.strueco.2014.08.003

Bloom, N., Draca, M., Van Reenen, J. Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity. Review of Economic Studies. 2016, 83(1), 87-117. http://doi.org/10.1093/restud/rdv039

Second, Lines 80-84: These external factors also include social mobility. Although social mobility may not operate directly on productivity levels, it can influence producers’ efforts and decision-making motivations. We also note that its incentive effect is related to whether producers can successfully move to a higher position within the industry’s productivity distribution.

Lines 89-92: As Heidrich (2017) found, in Sweden, which has a high level of social mobility on the whole, there are obvious differences in social mobility among regions within the country. To improve the accuracy of our findings, we therefore focus on social mobility at the city level.

Finally, we remove the research results of this paper in the revised manuscript (Section 1).

Q3: Some concepts are not well-explained in the literature review sections. For instance, in line 135, the authors mentioned “upward mobility” without prior explanation related to that concept. In addition, the concept of human capital should be explained in the literature review section rather than in the discussion section.

Response: Many thanks for your constructive suggestions. We provide additional explanations of these concepts in the revised manuscript.

Lines 140-142: By virtue of their ability and effort, people have the opportunity to obtain higher income and social status, and thus achieve upward mobility.

Lines 151-155: As we know, labor force is not only the main body of economic activities, but also the accessory carrier of human capital. Optimizing the allocation of human capital indicates that high-tech physical capital should be matched with high-level labor force, which contributes to improve labor productivity and promote economic development.

Q4: The authors need to explain what kind of statistical tools was employed to test the proposed hypotheses, along with the reasons for employing such a tool.

Response: Thank you for your comments. To explore the relationship between social mobility and firms’ total factor productivity, and test hypothesis 1, we construct a fixed effect model. For more details, please see Section 3.3. (Empirical model). In addition, we propose hypotheses 2-4 by analyzing the possible mechanisms. Referring to most of the existing literature, this paper adopts the mediation effect model to verify these hypotheses, and the results are shown in Table 9 and Table 10.

Q5: In the abstract section, the authors confirm that this study is designed to inspire the government to establish related policies according to the findings. However, in the policy implications section, the authors give three policy implications which more normative rather than practical. The authors need to elaborate more in giving suggestions for the policymakers. 

Response: Thank you for your comments. We all agree that your suggestion is very constructive. The revised policy implication are as follows:

Our study has some significant policy implications for reforms to improve the social mobility of labor force and talent. First, improving social mobility may be an alternative to China’s industrial upgrading, because lower social mobility distorts the social incentive mechanism, resulting in the inability to release social innovative vitality, which to some extent inhibits entrepreneurship. The government needs to optimize the institutional structure that can effectively eliminate the inefficient sectors, so as to actively create opportunities for social mobility and stimulate the potential of talents. Second, regarding developing countries seeking economic growth, we should be alert to the talent misallocation trap caused by rent-seeking. By creating a fair and open social environment, encourage and attract more talented people to enter the productive sector, so as to achieve sustainable development capacity. The government should also combine the mismatch of human capital with China’s economic restructuring, and formulate appropriate phased strategies for human capital accumulation to avoid the waste of educational resources. Finally, to cope with the severe international situation, we also need to optimize the business environment and actively support private enterprises, especially technology-intensive enterprises, to boost the development of the manufacturing industry.

Q6: The authors need to add the study limitations and suggestions for future studies.

Response: Thank you for your constructive suggestions. We provide the supplement in Section 6.

“There are some limitations in this study. First, when examining the impact of social mobility on firms’ TFP, we limited the research sample to Chinese listed companies. However, compared with listed companies, a large number of industrial enterprises above the designated size do not need strict supervision. People who work in listed companies account for merely a small part of the total labor force. The next step is to expand the research sample to industrial enterprises above the designated size in China to explore whether interesting findings different from those in this paper can be obtained. In addition, this study was conducted in China. We believe that future research can examine the impact of TFP in other emerging countries at different stages of economic development.”