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Using the survey data from Chinese private firms, this study investigates how the ruling Party affects firms’ treatment to their employees. We document a significant positive relationship between Party branch and employment protection. Specifically, firms with Party branch are more likely to sign labor contracts and provide stable jobs to their employees. Moreover, this effect is more prominent in regions with higher unemployment rate and in firms with labor union. Our findings highlight the Communist Party branch as an important communication bridge between the government and firms, which transfers public governance goals to firms, and then promotes employee-friendly practices.

The role of communist party branch in employment protection: evidence from Chinese private firms