Abstract:

This paper constructs a theoretical model to analyze how the special vertical structure in China's transition period affects macroeconomic performance through talent allocation, with a view to providing insights for deepening supply-side structural reform and promoting economic recovery at this stage in China. The talent factor is introduced into the vertical oligopoly model to considers the allocation of talent in upstream SOE employment and downstream private enterprise entrepreneurship. The model finds that under a downward economic shock, the vertical structure has two effects on economic recovery: first, the profits of the upstream sector with market power are more negatively affected relative to the downstream sector, and the attractiveness of the talent is relatively weakened, which makes talent tend to flow from the upstream employment sector to the downstream entrepreneurship sector,thereby buffering the downward economic shock and promoting economic recovery; second, the scale effect of the upstream is impaired, and a moderate reduction in the number of upstream competitors helps to improve social welfare by restoring the scale effect, but simultaneously increases upstream market power, leading to the flow of talent from the downstream entrepreneurial sector to the upstream employment sector, thereby exacerbating downward economic pressure. When the efficiency of rent allocation is low, the second effect dominates the first; when the efficiency of rent allocation is high, the first effect dominates the second. At this point, the scale effect and talent allocation optimization achieve organic unity, mitigating economic downturn and facilitating recovery.

Key words:

upstream monopoly, entrepreneurship, economic downturn, the scale effect, the rent allocation