Urban Shrinkage and Labor Investment Efficiency: Evidence from China

Round 1

Reviewer 1 Report

This research is an interdisciplinary study on the sustainability of development, where the authors show that the spread of urban shrinkage in China, is responsible for a significant part of the over-investment in labour in most listed companies and identify a channel through which inter-city development affects the sustainability of companies and the economy itself. 

1.  The article is not properly referenced.

2. The introduction must be properly constructed, using the structure I list below: 'Opening, context, disruption and resolution'.

3. The results should be discussed using more supporting literature (many studies are already in this research area).

4. Tables, should be clearly constructed and according to journal standards.

5. The analysis, should be further commented, in particular, tables 6 - 7 - 8 and 9 (Start-up enterprise sample estimates).

6. Model 4, Line 492, is not at all clear, it is important to describe the individual variables precisely.

7. The graphics section must be inserted according to the journal standards, I recommend drawing conclusions and discussing the results also in terms of political implications.

8. Revisions to the English language required.

Moderate.

Author Response

Dear Reviewer:

Thank you very much for reviewing my work in your busy schedule and for your valuable comments. We have carefully revised the first draft of the article in the light of these comments. We would like to respond to your comments one by one as follows:

1. The article is not properly referenced.

Based on my reviewer's suggestion, I rechecked the reference citations and made changes. (See attachment for details)

2. The introduction must be properly constructed, using the structure I list below: 'Opening, context, disruption and resolution'.

The introduction of our paper did have shortcomings. And we have restructured it as requested by my reviewer.

Opening:

Recently, the topic of "Kong Yiji's robe" has become hot in China. ……Therefore, in the context of regional imbalances, studying the labor investment efficiency of enterprises aroused our interest.

Context:

 

Since the reform and opening up, under the top-level design of the growth model, along with the vigorous urbanization construction, China has continued its growth-oriented model for over 30 years. ……Therefore, whether a city's population is growing or shrinking significantly reflects the development gap between regions. This provides a good opportunity to study how the population gap between cities resulting from urban shrinkage affects labor investment efficiency, which not only has significant practical implications but also offers a path to explore the theoretical mechanisms of imbalanced development affecting sustainable development.

disruption and resolution'

However, to the best of our knowledge, existing research has not provided answers to the impact of urban shrinkage on labor investment efficiency in enterprises during China's urbanization process. To investigate this issue, our estimation strategy exploits two sources of variation. …… Our study uses A-share listed companies in Shanghai and Shenzhen from 2010-2019 as the research sample, comparing the differences in labor investment efficiency between cities that have experienced or are more likely to experience shrinkage and cities that are still growing or less likely to experience shrinkage, before and after widespread emergence of urban shrinkage.

3. The results should be discussed using more supporting literature (many studies are already in this research area).

This suggestion was so important to me. And I have discussed the results in the context of a recently published literature [37].

[37] Singh A. Economic growth and labor investment efficiency. International Review of Finance 2023.

4. Tables, should be clearly constructed and according to journal standards.

We have updated the table (See attachment for details).

5. The analysis, should be further commented, in particular, tables 6 - 7 - 8 and 9 (Start-up enterprise sample estimates).

We have included a more detailed discussion of the statistical and economic significance of the coefficients in the heterogeneity analysis section (See attachment for details).

6. Model 4, Line 492, is not at all clear, it is important to describe the individual variables precisely.

Details of all variables are provided in the Appendix. Model 4 is identical to Model 2 in terms of the main variables, except that the control variable in Model 4 is the interaction term of the control variable in Model 2 and the year.

7. The graphics section must be inserted according to the journal standards, I recommend drawing conclusions and discussing the results also in terms of political implications.

We have corrected the graphics insertion format (See attachment for details).

8. Revisions to the English language required.

We have tried our best to improve English writing.

Finally, I would like to thank you again for your valuable suggestions. Of course, there are still some inappropriate points in the revised manuscript due to my personal ability. So I would like to get the criticism or advice from my reviewer.

                                                                                      Yours respectfully,

                                                                                              Author

                                                                                            2023-6-23

Reviewer 2 Report

In order improve the quality of the manuscript, we recommend the following review points to revise them:

1. The paper writing quality needs more intention to improve it (i.e. see the author quidline Sustainability).

2. The Abstract : Author could follow this methodology: (Backgrownd, the purpose, Methodology/Method used, Findings, Originality/value, Implication policy, )

3. Literature review : the authors must add theoritical cited update/ recent research papers (from Data bases like MDPI Journals, Elsevier, Springer, Wiley, Sage, Elmard) related to the study aim ( is very important). 

Author must follow Sustainability Author Guidline  (exp. Hamermesh, 1993. Put this reference between barckets [...] ) (Martinez-Fernandez et al., 2012, Pallagst, 2008; Wiechmann, 2008),  Hsieh et al. (2013), Wu, K. and C. Yao (2021), y Jung et al. 298 (2014).

Please revise all these cited references in body of the manuscript and change the stucture.

4.  Hypotheses : Are not clair (simplify them and add reference cited author according each hypothesis). 

Ha: After widespread urban shrinkage occurs, enterprises located in cities that are more inclined towards growth are more likely to experience labor investment inefficiency than enterprises located in cities that are more inclined towards shrinkage before the occurrence of widespread urban shrink-

Hb: After widespread urban shrinkage occurs, enterprises located in cities more inclined towards shrinkage are more likely to experience labor investment inefficiency than enterprises located in cities more inclined towards growth before the occurrence of widespread urban shrinkage.

5. The study selects relevant data from 2010 to 2019: It is not update. (author can add 2020-2022 databases to get more recent significance.

6. But all variables in clair TABLE to summarize them.

7. Results (Descriptive Statistics) : Add Source and Statistical saftware used in your study for these tables !

Table 1. Distributional statistics. Table 2. Flexible estimates

Figure : ( Page11) delete and add in appendix with regualr size !

8.  Conclusion :

 * Add limitation section

* Origianl value and recommendation

------------------------------------------------------------------

Revise them and uplaod the full revised version.

Good luck

Grammar and spelling to revise.

Author Response

Dear Reviewer:

Thank you very much for reviewing my work in your busy schedule and for your valuable comments. We have carefully revised the first draft of the article in the light of these comments. We would like to respond to your comments one by one as follows:

1. The Abstract : Author could follow this methodology: (Backgrownd, the purpose, Methodology/Method used, Findings, Originality/value, Implication policy, )

Thank you for helping me to improve the abstract section so carefully, and I have reorganized the language of the abstract as you requested.

Abstract: In the context of unsustainable urban growth patterns and employment difficulties. We examine the impact of urban shrinkage on labor investment efficiency by drawing on the idea of difference-in-difference model. Using a sample of China firms from 2010 to 2019, Our findings suggest that the widespread occurrence of urban shrinkage in China was responsible for a significant portion of the excessive labor investment in most listed companies. These results are robust to alternative specifications. In addition, we further found heterogeneity in the impact of urban shrinkage on labor investment efficiency. For state-owned or non-startup listed companies, this impact is manifested as the promotion of employment redundancy, while for non-state-owned or startup companies, the impact is reflected in alleviating insufficient employment. Thus, we creatively identify a potential channel through which imbalanced development between cities affects the sustainability of corporate and economic.

2. Literature review : the authors must add theoritical cited update/ recent research papers (from Data bases like MDPI Journals, Elsevier, Springer, Wiley, Sage, Elmard) related to the study aim ( is very important).

We have added four relevant studies to the recently published literature [23 24 33 37].

3 Author must follow Sustainability Author Guidline  (exp. Hamermesh, 1993. Put this reference between barckets [...] ) (Martinez-Fernandez et al., 2012, Pallagst, 2008; Wiechmann, 2008),  Hsieh et al. (2013), Wu, K. and C. Yao (2021), y Jung et al. 298 (2014).

Please revise all these cited references in body of the manuscript and change the stucture.

Based on my reviewer's suggestion, I rechecked the reference citations and made changes. (See attachment for details)

4. Hypotheses : Are not clair (simplify them and add reference cited author according each hypothesis).

Streamlined research hypothesis

Ha: The widespread emergence of urban shrinkage deteriorates labor investment efficiency.

Hb: The widespread emergence of urban shrinkage improves labor investment efficiency.

5. The study selects relevant data from 2010 to 2019: It is not update. (author can add 2020-2022 databases to get more recent significance.

Thanks to the valuable comments of the reviewers. The data from 2010 to 2019 were selected for the study only considering the emergence of the epidemic at the end of 19 years, which may have a large impact on the employees of the company.

6. But all variables in clair TABLE to summarize them.

The statistical results of variables are shown in Table1.

7. Results (Descriptive Statistics) : Add Source and Statistical software used in your study for these tables !

We have updated the table (See attachment for details). Source and Statistical software used in my study are explained in the third part.

(1) Sample and Data Source:

The enterprise data in this study are sources from the CSMAR database, and data related to urban shrinkage comes from the Beijing City Lab and the research findings of the School of Architecture at Tsinghua University [7]. Since the urban shrinkage data published by the City Lab starts from 2010 and the COVID-19 pandemic emerged at the end of 2019, to exclude the impact of the pandemic on the labor investment efficiency of enterprises, this study selects relevant data from 2010 to 2019 of A-share listed companies in Shanghai and Shenzhen as the research sample. In the sample selection process, we perform the following treatments to ensure the data's validity: excluding financial companies, special treatment (ST) companies, and samples with missing variables. In addition, we winsorize all continuous variables to eliminate the influence of outliers. Finally, all the data processing in our paper is implemented by stata15.

8. Conclusion :

 * Add limitation section

* Origianl value and recommendation

We have rewritten the conclusion section as requested by the reviewer.

Finally, I would like to thank you again for your valuable suggestions. Of course, there are still some inappropriate points in the revised manuscript due to my personal ability. So I would like to get the criticism or advice from my reviewer.

                                                                                    Yours respectfully,

                                                                                            Author

                                                                                           2023-6-23

Reviewer 3 Report

Urban Shrinkage and labor investment efficiency: Evidence from China

 

The abstract of the study must have background of topic, key objective, data, methods, main findings and one or two main policy implication.

What is meant by Kong Yiji's robe?

what is the motivation to use the regression method?

The literature review section is a summary of different studies. It should be explained what has been done previously and where is the literature gap which authors want to cover in this study.

what is the mechanism and justification for choosing these variables in the Empirical Model?

The results and discussion section are weak. It should be improved by adding the economic justification of the results.

The conclusion and policy implications should be based on the findings.

Author Response

Dear Reviewer:

Thank you very much for reviewing my work in your busy schedule and for your valuable comments. We have carefully revised the first draft of the article in the light of these comments. We would like to respond to your comments one by one as follows:

1）The abstract of the study must have background of topic, key objective, data, methods, main findings and one or two main policy implication.

Thank you for helping me to improve the abstract section so carefully, and I have reorganized the language of the abstract as you requested.

Abstract: In the context of unsustainable urban growth patterns and employment difficulties. We examine the impact of urban shrinkage on labor investment efficiency by drawing on the idea of difference-in-difference model. Using a sample of China firms from 2010 to 2019, Our findings suggest that the widespread occurrence of urban shrinkage in China was responsible for a significant portion of the excessive labor investment in most listed companies. These results are robust to alternative specifications. In addition, we further found heterogeneity in the impact of urban shrinkage on labor investment efficiency. For state-owned or non-startup listed companies, this impact is manifested as the promotion of employment redundancy, while for non-state-owned or startup companies, the impact is reflected in alleviating insufficient employment. Thus, we creatively identify a potential channel through which imbalanced development between cities affects the sustainability of corporate and economic.

2）What is meant by Kong Yiji's robe?

The term "Kong Yiji's robe" originates from Lu Xun's short novel "Kong Yiji", which is an internet term used by CCTV media to describe college students who have difficulties in finding employment. This article is also to express my own opinion on this topic which has aroused heated discussion.

3）what is the motivation to use the regression method?

Chinese scholars in the field of urban shrinkage have found that there are quite a lot of shrinking cities in China. However, the shrinkage is not serious and many of the shrinking populations have gathered in big cities. This leads me to the idea of doing a comparative study to empirically estimate how urban shrinkage affects micro firms, considering urban contraction as an endogenous policy. The idea of DID is a good way to implement my idea. Drawing on Nunn, N. and N. Qian's (2011) methodology (The Potato's Contribution to Population and Urbanization: Evidence from A Historical Experiment). The estimation method in the paper was then used.

4）The literature review section is a summary of different studies. It should be explained what has been done previously and where is the literature gap which authors want to cover in this study.

The introduction of our paper did have shortcomings. And we have restructured it as requested by my reviewer (See attachment for details).

5）what is the mechanism and justification for choosing these variables in the Empirical Model?

The selection of variables was based on existing studies:

Currently, scholars often use the econometric analysis model proposed by Jung et al. to measure the labor investment efficiency of companies [8] (e.g., [9, 10, 12, 13, 35, 36]). Therefore, this study also adopts the econometric analysis model proposed by Jung et al. [8]to measure the labor investment efficiency of companies, as shown in the specific Model (1):……

Based on existing relevant literature [8-10, 12, 13, 17, 20, 35, 36], this study selects factors at the company level, such as company size (Size), asset-liability ratio (Lev), quick ratio (Quick), Tobin's Q value (TobinQA), the growth rate of operating income (Growth), operating cash flow ratio (Cashflow), book-to-market ratio (BM), return on assets (ROA), listing age (FirmAge), number of board members (Board), and the proportion of independent directors (Indep), as control variables in the basic regression model. In addition, this study also controls for year and company-fixed effects.

 

6）The results and discussion section are weak. It should be improved by adding the economic justification of the results.

We have included a more detailed discussion of the statistical and economic significance of the coefficients in the results analysis section (See attachment for details).

7）The conclusion and policy implications should be based on the findings.

We have rewritten the conclusion section as requested by the reviewer.

Finally, I would like to thank you again for your valuable suggestions. Of course, there are still some inappropriate points in the revised manuscript due to my personal ability. So I would like to get the criticism or advice from my reviewer.

                                                                                       Yours respectfully,

                                                                                             Author

                                                                                          2023-6-23

Reviewer 4 Report

The study set out to investigate a well-conceived and defining trend. The methodological background is certainly commendable. On the whole, it would be sufficient to highlight a few of the many variables - it cannot, therefore, address the assessment of each factor in a meaningful way.  I would make the following suggestions for improving and developing the study:

1) The in-text citations do not consistently follow the desired structure, with confusing author and reference numbering. These should be standardized and attention should be paid to include works marked with the author's name in the bibliography used (starting from lines 65,68-69). At least half of the references are missing from the bibliography.

2) Write out the abbreviations used first in the text (e.g., line 254 'ST'; line 288 JYMSC)

3) In my opinion, only the return on investment criteria or even the management decision criteria sections would be sufficient. Then you could go into more detail on the reasons for significant relationships. 

For Table 2, we indeed do not see large differences, yet it is interesting that in the graphs, besides the relatively linear Labeff, OLabeff, and ULabeff becomes negative in 2016,2017,2018. It would be worth writing a few sentences about this.

4) In line 538 I disagree with the definition of start-ups. Start-ups are not judged by their age but by their activity, technological focus, and dynamic growth. For such businesses, investments in technology are more typical than investments in human resources. If any of the companies surveyed are start-ups, they would be excluded from the sample and the others could be interpreted as new-born or young enterprises.

5) In the conclusion, it would be good to address the limitations of the research, since it has examined the effectiveness of labor investment along the economic indicators of the companies, although several social and demographic effects may also play a role in these strategic decisions.

 

Overall, it was very good to see the derivation of the hypotheses in the literature, I did not miss the formulation of the research question, although methodologically it should precede the formulation of the theoretical hypotheses.

Nice work!

Author Response

Dear Reviewer:

Thank you very much for reviewing my work in your busy schedule and for your valuable comments. We have carefully revised the first draft of the article in the light of these comments. We would like to respond to your comments one by one as follows:

1) The in-text citations do not consistently follow the desired structure, with confusing author and reference numbering. These should be standardized and attention should be paid to include works marked with the author's name in the bibliography used (starting from lines 65,68-69). At least half of the references are missing from the bibliography.

Based on my reviewer's suggestion, I rechecked the reference citations and made changes. (See attachment for details)

2) Write out the abbreviations used first in the text (e.g., line 254 'ST'; line 288 JYMSC)

We have made corrections to the variables delivered:

1)special treatment (ST) companies

 

2)Degree of Urban Shrinkage:

Population outflow is a vital characteristic of urban shrinkage. The degree of urban shrinkage in this study is calculated by multiplying the population change index of the corresponding cities in 2010, published by the Beijing City Lab, with the population change index of the related cities in 2020 [7]. Since the City Lab did not publish the population change index for cities that had not experienced shrinkage by 2010, we set the population change index for those cities to 1. The degree of shrinkage in the place where the firm operates is denoted by JYMSC…

3) In my opinion, only the return on investment criteria or even the management decision criteria sections would be sufficient. Then you could go into more detail on the reasons for significant relationships. 

We have strengthened the theoretical derivation part and combined it with the theoretical literature and the latest literature in related fields to strengthen the analysis For Table 2, we indeed do not see large differences, yet it is interesting that in the graphs, besides the relatively linear Labeff, OLabeff, and ULabeff becomes negative in 2016,2017,2018. It would be worth writing a few sentences about this.

For Table 2, we indeed do not see large differences, yet it is interesting that in the graphs, besides the relatively linear Labeff, OLabeff, and ULabeff becomes negative in 2016,2017,2018. It would be worth writing a few sentences about this.

Table2 corresponds to the parallel trend test in the DID model, and the study expects that the coefficients before 15 years should not be significantly different, and after 15 years there is a significant change in the coefficients relative to the previous ones. The coefficient of ULabeff was originally positive, but turned negative after 15 years, which also further verifies the hypothesis that Ha urban contraction occurs extensively, the more the population is concentrated in the city the more likely the firms are to over-invest in labor, and the less likely they are to under-invest in labor

4) In line 538 I disagree with the definition of start-ups. Start-ups are not judged by their age but by their activity, technological focus, and dynamic growth. For such businesses, investments in technology are more typical than investments in human resources. If any of the companies surveyed are start-ups, they would be excluded from the sample and the others could be interpreted as new-born or young enterprises.

The reviewer made a very good point and we have made a correction in the text by replacing young enterprises with start-ups.

5) In the conclusion, it would be good to address the limitations of the research, since it has examined the effectiveness of labor investment along the economic indicators of the companies, although several social and demographic effects may also play a role in these strategic decisions.

We have rewritten the conclusion section as requested by the reviewer.

Finally, I would like to thank you again for your valuable suggestions. Of course, there are still some inappropriate points in the revised manuscript due to my personal ability. So I would like to get the criticism or advice from my reviewer.

                                                                                               Yours respectfully,

                                                                                                       Author

                                                                                                     2023-6-23

Reviewer 5 Report

The paper needs some improvements before being considered for publicaton.

The main aim of the paper must be better higlithed, adding the novelty of the paper.

The literature review must be improved, adding new studies in the field.

The discussion has to be improved, linking the results with the results in the extant literature.

The conclusions must be improved adding limitations, further research and practical implication.

Author Response

Dear Reviewer:

Thank you very much for reviewing my work in your busy schedule and for your valuable comments. We have carefully revised the first draft of the article in the light of these comments. We would like to respond to your comments one by one as follows:

1）The main aim of the paper must be better higlithed, adding the novelty of the paper.

We have rewritten the abstract and introduction sections to highlight the research objectives and innovation.

2）The literature review must be improved, adding new studies in the field.

We have added five papers [23 24 32 33 37].

3）The discussion has to be improved, linking the results with the results in the extant literature.

This suggestion was so important to me. And I have discussed the results in the context of a recently published literature [37].

4）The conclusions must be improved adding limitations, further research and practical implication.

We have rewritten the conclusion section as requested by the reviewer.

Finally, I would like to thank you again for your valuable suggestions. Of course, there are still some inappropriate points in the revised manuscript due to my personal ability. So I would like to get the criticism or advice from my reviewer.

                                                                                             Yours respectfully,

                                                                                                     Author

                                                                                                 2023-6-23

Round 2

Reviewer 1 Report

The requested changes have been made

Minor

Author Response

Dear reviewer,

Thanks for your kind suggestion.  And I have revised my grammar and spelling.

 Thanks for your technical review again.

Yours respectfully,

Author

2023-7-3

Reviewer 2 Report

Dear Authors, 

Thank you for your revised manuscript draft.

Some changes must be done:

- All tables bellow must be placed in appendix : (Tables 7 -9).

- Decompose these long paragraphes to simple and clear ( max 5 lines per paragraph) : 52 -74 ; 82 -100 ;  102- 132 ;  133-157 ; etc.

- (4) Model Construction : write in clear way the Model (2) and Model (3).

- Add Source to all tables :  example Table 1. Distributional statistics.  Table 2. Flexible estimates, etc.

- 7. Conclusion : Change and add: Conclusion, limitations and future research

Good luck.

Grammar and spelling to revise again.

Author Response

Dear reviewer,

Thanks for your kind suggestion. We have carefully revised the second draft of the article in the light of your comments. We would like to respond to these comments one by one as follows:

1. All tables bellow must be placed in appendix : (Tables 7 -9).

Thank you for helping me to standardize my article, and we have put the Tables (7-9) in the appendix as you requested. (See attachment for details)

2. Decompose these long paragraphs to simple and clear ( max 5 lines per paragraph) : 52 -74 ; 82 -100 ;  102- 132 ;  133-157 ; etc.

Your advice is very important for my article. We have decompose these long paragraphs as you requested. (See attachment for details)

3. (4) Model Construction : write in clear way the Model (2) and Model (3)Please revise all these cited references in body of the manuscript and change the stucture.

Based on my reviewer's suggestion, we have reinterpreted the definition of the variables in the model (4). (See attachment for details)

4. Add Source to all tables :  example Table 1. Distributional statistics.  Table 2. Flexible estimates, etc.

We have indicated the source of the data at the bottom of the table1-9.

5. Conclusion: Change and add: Conclusion, limitations and future research.

We have changed the subheading as requested. Thank you for your suggestion to make the title more relevant to the content.

6. Grammar and spelling to revise again.

We are very sorry for our poor English. Thanks for your technical review. And I have revised my grammar and spelling.

Yours respectfully,

Author

2023-7-3

Reviewer 5 Report

The paper can be considered for publication in the actual form

Author Response

Dear reviewer,

Thanks for your kind suggestion. And thanks for your technical review.

Yours respectfully,

Author

2023-7-3