Research On Labor Institutional Change's Income Distribution Effect

Income distribution is always one of the important issues in economics. In concerned factors which affect income distribution and income inequality, institution is seemed as one of important factors. As a non-market factor, institution, not only affects income decision mechanism, but also by influencing the coefficient of return rate ultimately affect the results of income distribution. Labor Law on wage income, as a formal labor institution, also has significant impacts on labor market equilibrium and wage income decision. So, our country's New Labor Law, theoretically will also have impact on labor market equilibrium and wage income decision, and has the function of income redistribution. This is one of the goals that New Labor Law expects to achieve. A good institution is scarce, the implementation of a good policy or institution, whether to achieve the expected objectives and the extent to which can be achieved, need to be tested empirically. Despite the time after implementation of the New Labor Law is short, we can only get two periods of data, however during the research of its income distribution effects, we can still draw useful conclusions. In view of this, When New Labor Law has been implemented for more than a year, Analyzing and evaluating its income distribution effect, has important theoretical significance and policy significance. The contribution of this paper is to try to comprehensively and systematically evaluate income distribution effects of New Labor Law as a formal institutional change with micro-data, with which we can increase the accumulation of academic theory on income distribution, and provide references for new policy's establishment and implementation.With regard to wage legislation effects on income distribution, there are many foreign literatures, but the analysis of foreign literature is based on the labor market which is relatively perfect and standardized. While China is still in the economy transformation period, labor market is still not perfect, coupled with labor market still being buyer market, and the awareness of workers'rights protection is weak, these all come to a decision that the same wage legislation or the implementation of institution, the theory from the Western practice still can not explain the income distribution practice from labor market in China. In view of this, only we can do is that on the basis of Western theories, establish our own theory about the corresponding relationship between China's own labor legislation and income distribution in order to better guide policies in practice. The current domestic research, while seem the labor wage legislation as a formal system has impact on wage income, but there is still very little quantitative research on it. The current researchs analyze the wage income distribution with the assumption that the labor system is exogenous, or assumption that all firms comply with the labor institutions. Under these assumptions, even if after control human capital variable and other characteristics variables, we are still unable to explain all the differentials in wage income. This paper will look on labor institutions as endogenous, and also assumes that the "opportunism" of firm's implementaing New Labor Law is different. Because "opportunism" is different, the degree of firms' compliance with New labor Law is then different, so it can be expected, under New Labor Law, the labors in minor "opportunism" firms will get more benefit, while others in serious "opportunism" firms maybe still be unable to enjoy the benefits of implementation of New Labor Law. Due to different ownership sectors, industries and regions, the degrees of firms'implementing New Labor Law are different, so the final income distribution effects of different sectors, industries and regions are not same.In addition, we expect New Labor Law will raise the price of labor factor. As labor factor price increases, it maybe causes substitution between factors, which will further cause factors mobile through different industries and regions. The mobility of factors will further affect the factor markets and factor prices of different industries and different regions, which will ultimately affect the wage determination mechanism and the wage differentials of inter-industry and inter-region. New Labor Law can not completely eliminate markets's segmentation, but by influencing the non-state sector, it will eventually affect inter-sector wage income differentials. In short, we can expect New Labor Law will generate income distributional effects to general labor factors, different sectors, different industries and different regions. Here, the effect of income distribution is further expected to be divided into two categories, namely, New Labor Law's absolute income distribution effects and relative income distribution effects, which will be tested using suvry data.In absolute income distribution effects, we mainly give empirical analysis of wage distribution, wage decision-making mechanism and income differentials. Firstly, wage income distribution. Survy data shows that after the implementation of New Labor Law, the overall income distribution of laborers move to the right which shows that duo to the impact of the New Labor Law, laborers'wages on the whole rose greatly. Secondly, wage income decision-making mechanism. From modified Mincer Equation OLS estimate and Chow test, we can find before and after the implementation of the New Labor Law, Mincer equation has significant structural differentials. Moreover, the estimated coefficients of equation show New Labor Law s the rate of return of factors, and thus overall has significant positive impact on wage decision. By quantile regression model estimation, we can find, New Labor Law has positive and significant distributional effects on wage distribution in different quantile interval, but the rate of return of different quantile interval is not same. In general, compared to the laborer who was in higher position, there is a greater income distribution effect generated by New Labor Law for lowers. The estimation results of the wage equation in the different ownership sectors, different industries and different regions show that New Labor Law in various sectors, industries and all regions has a positive distributional effect, but the degree is different. Overall, the distributional effect of the non-state sector is greater than the state sector, the distributional effect of labor-intensive industries is greater than the capital-intensive and technology-intensive industries and the impact of the central region is greater than the eastern and western's. Finally, decompose wage income differentials. Decomposition results show that after the implementation of New Labor Law, sector wage differentials have a greater downward degree. With the technology-intensive industry as a reference benchmark, we carry on dynamic JMP decomposition to the industry wage differentials. From the results, in the period before and after the labor institutional transition, wage differentials decreased to technology, capital wage differentials increased to technology. With the eastern region as a reference benchmark, we carry on dynamic JMP decomposition to the regional wage differentials. From the results, in the period before and after labor institutional transition, the central wage differentials declined to eastern, westen wage differentials increased to easten. Moreover, the results of decomposition also show that the unexplained coefficients can explain the above differentials. As for unexplained coefficient differentials, New Labor Law plays a great role in it.Labor institutional change, not only affects the absolute income level of laborers, but also affects their relative income position, the latter means income mobility. The positive process is from two aspects:the measurement of income mobility and the determinants of income mobility. Firstly, income mobility measurement. The empirical results show that income nobilities of different laborers groups are different. From the demographic characteristics, the female, low education, middle-aged, married and local population has higher mobility compared to the corresponding groups. From the firm features, the mobility of laborers'wage income in the firms of different ownerships, different sizes, different regions and different intensity of the factors is also different. Non-state firms, small or middle size, western regions, and labor-intensive industries than the other corresponding groups have higher earnings mobility. In the structure of income mobility, we find that in the groups of demographic characteristics, women, low education, middle-aged, married and off-site population showed a higher upward probability of mobility than their counterparts. Among them, women, low education and middle-aged groups, show "double high" phenomenon of both upward mobility and downward mobility which deserves special attention. While in the group of firms'features, the non-state-owned enterprises, small or middle size, and the eastern regions and labor-intensive firms than the corresponding groups showed a higher upward probablity of mobility. Secondly, the estimates of income mobility determinants. Determinants of income mobilities from different groups are different. Overall, however, regional differences and the relative position in each subgroup have a significant impact on earnings mobility. Generally speaking, all income groups of eastern than the corresponding income groups of Midwest have greater opportunities of mobility to a higher-income group, while the possibility of downward mobility is lower than the central and western regions; while for the groups in the top position of the subgroup, there are more opportunities to flow to the higher group, the probability of all groups below the location to flow to the lower-income groups should be large.Income mobility will affect the inequality of income distribution, therefore this paper finally analyses the ultimate effect of the income distribution by calculating and decomposing the income inequality indices. From various measures of income inequality index and its change, it is seen that after the implementation of New Labor Law, the total wage income of the individual moves towards a fairer income distribution. The trends of inequality condition of different sections, different industries and different regions are consistent with the whole. The Gini coefficient of inequality indices and variance decomposition results show that, due to New Labor Law, income inequality degrees of different income groups have a certain degree of s, but influential factors, the direction of the impact of these factors as well as the extent of impact are different, and eventually lead to differentials in Gini coefficient, the extent of variance decline and the path of decline.