The Labor Share Of Income In China Under The Transfer Of Industrial Structure

Since the middle of 1990s, the labor share of income has decreased continuously in China. It has been estimated that from 1996 to 2006, the labor share has decreased from 54% to 40%. In 1880s, some developed countries also undertook this similar period, and this aroused great concern among the academics. Although it was not a unique phenomenon in China, however, compared with other countries, the scale-falling of Chinese labor shares is too huge. At the same time, some issues are happening. Firstly, Income gap is widening. In 1978, Chinese Gini coefficient is 0.317, while in 2010, it is above 0.5, greatly exceeded to 0.4(the international warning line). Secondly, the contribution of consumption to GDP growth and the proportion of private consumption are declining in varying degrees. The former has declined from 51.6% in 2000 to about 35% in 2009, and the latter is from 48.3% in 1992 to 37.4% in 2009. The theoretical research and empirical analysis have shown that income disparities and weak consumption are inextricably linked with the decline of labor share.So, measuring accurately labor share of China, finding the influence factors and making policies to improve labor share, improving the situation that China's labor share continues to decline is imminent. Numerous studies have shown that, In the process of economic development, labor share will be impacted by industrial restructuring. In the critical period of structural adjustment in China, this factor cannot be ignored. At the same time, is labor share in China able to match the framework of neoclassical economic? Have specific factors to explain changes in labor share based on China's national conditions? What is the path that globalization affects labor share in open economy? These questions need to be answered.Firstly, this paper describes the history of the change of labor share in China, measures the decreasing size of the labor share, and expounds the grim situation. Secondly, analyses the direct effect of industrial structure transfer. Then, analyses the effect of other factors on the labor share. Finally, the final conclusion of the study is reached. The chapter is organized as follows: Chapter 1, introduction. This chapter expounds the background and significance, and gives the structure arrangement of this paper.Chapter 2, literature review. The problem and shortage of current research is pointed out through reviewing the domestic and foreign literature, then the entry points are found, and the innovation points are given.Chapter 3, the change of the labor share. First of all, according to the past studies, the actual situation in China and the objective of this paper, define labor share accurately, and investigate the change of the labor share. In this process, adjust the inconsistent caliber that may exist to avoid misunderstanding the decreasing trend of labor share.Chapter 4, the structure effect of the change of labor share. This chapter uses two different methods to investigate the structure effect of the change of labor share.Chapter 5, determinants of labor share. Constructing simultaneous equations, using Seemingly Unrelated Regression (SUR), distinguish the different paths of the impact of globalization on labor share to avoid the policy bias. At the same time, identify the impact of other factors.Chapter 6, Conclusions and policy recommendations. According to the empirical research, put forward policy recommendations, and point out the shortages of the study and the direction of further research.The main conclusions of this paper are:FDI and foreign trade reduced the share of labor income totally, but it is mostly caused through Industrial restructuring; capital deepening, technical progress and expenditure improve China's labor share; the effect of state-owned enterprise reform is not significant; change in industrial structure and human capital is the main reason of the decline of labor share.This paper has three main innovation points:first, review the disputes of the labor share measure, and for Chinese statistics system, give the measurement method, and considering that the relative statistic data may exist inconsistent caliber put forward a new method to adjust the size of the data. Second, We must choose the appropriate variables in building a suitable model, at the same time test and verify the regression results of the model, those all in purpose of removing the possibility that the effect of capital-output and other factors on the labor share is inconsonant. Third, Explore the different paths of the impact of globalization on labor share, namely, research the effect of globalization is direct or depend on the industrial structure. There are three deficiencies all through this paper. Firstly, the data is too lagged. Secondly, the adjustment of caliber about labor share is filled with subjectivity and the model founded in much more hypotheses. Thirdly, the paper failed to solve the endogenous problem about some variables.