Research On Change And Promotion Strategy Of Labor Income Share In China From The Perspective Of Biased Technical Progress

Labor income share reflects the degree of labor participation in income distribution. It is an important part of national income distribution. Since the 1990’s, the labor income share in China has showed to some extent downward trendon the overall andat a low level in recent years. Compared with many countries of the world, especially the developed countries, the share of the labor in Chinais relatively low. This is not only affected the growth of the consumer demand, but alsowent against narrowing the gap of income, improving the quality of economic growth and social stability. The key to improve income distribution is to find the important influence factors of labor income share.From the perspective of input and output, income distribution structure depends on the structure of production, and the production structure is closely related to the nature to technological progress and the proportion of inputs.Therefore, the factor biased technological change is a important factor that affect the labor income share. Since reform and opening up, along with the advancement of industrialization and informatization of China, the capital bias and the skill bias of technological change enhanced obviously.It has changed the relative marginal output of different production factors and then had a certain impact onthe labor income share in China. Therefore, to study labor income share from the perspective of technology progress bias is helpful to explain the reasons of the decline of labor income share in China and to find a way to improve labor income share.On the basis of predecessors’research results, this paper uses CES production function to analyze the meaning of capital biased technological change, skill biased technological change, cause of biased technological changeand its influence on labor income share. Second, through data analysis of the trend and the international comparison, the paper discusses the evolution and present situation of labor income share in China. The effects of lower labor income share are also discussed here. Then, through the standardization system of CES production function, the capital bias index of technological progress and the skill bias index of technological progress are estimated.The paper use the regression model analysis and the method of granger causality test to inspectthe influence ofbiased technological change on labor income share, the influence of skill bias of technological change on skilled and unskilledlabor income share, and the influence of skill bias of technological change on overall labor income share.Based on that, the paper analyses the cause of technological progress of capital biasand skill bias in China. Finally, the future trend of labor income share in China is discussed, and from the view ofbiased technological progress,some suggestions on improving labor income share in Chinaare put forward.The main conclusions of this paper are as follows:First, since China’s reform and opening up, the labor income share in Chinawas at low level and showed a certain degree of decline. Whether to compare with other countries at present stage, or to compare with the labor income share in the industrialization of some countries, the labor income share in Chinais low. The low level of labor income share had a negative effect on consumer demand, the income gap and the quality and efficiency of economic growth. Second, there’s a obvious technological progress of capital bias in China in 1979-2014 and it had caused a hindering effect on the growth of the labor income share in China. Third, thecauses of technological progress of capital bias are associated with three factors:the reduced the relative efficiency of capital and labor, the rapid increase of the capital stock per labor and the fluctuations of the relative marginal output of capital and labor. The distortion of the price of production factors, the insufficient use of state capital, the waste of capital caused by investment blindness and repeatability of enterprises, etc. are major causes of lowcapital efficiency in China.The industrial structure changes, the influence of government behavior on investment scale, the increasing need for the infrastructure construction in the course of urbanization, the relative slowdown of employment growth, etc.are major causes of the increasing capital deepening in China. Fourth, there’s a obvious skill bias of technological progress in 1985-2014 in China. In different cases, the influence of skill biased technical progress on total labor income share is not always uncertain. Skill biased technical progress could have positive, negative, or uncertain effectson total labor income share. In China, skill biased technical progress is not the main reason for decline of labor income share.To make the labor income share increasing, one way is to improve the relative efficiency of capital and labor.Then the skill biased technical progress can have positive effect on total labor income share. Fifth, the skill bias of technological progress is beneficial forimproving the relative income share of skilled laborand the unskilledlabor. Because the base of unskilled labor income share in GDP is larger and the income share of skill labor in GDP is too small, the skilled labor income share play a decisive role to the overall proportion of labor income and eventually it decreased the total labor income share. Therefore, to improve labor income share, it is needed to increase the supply of skilled labor by improving education and transformation of the social concepts and thus to improve the labor income share of skilled labor.