A Study On The Evolution Of China's Industrial Structure And Labour Share Based On Factor Levels

In the year of 2007,the labour share in China has ended its decline that starts in the middle of 1990s,and begins to transfer into the rising trend.In view of this phenomenon,this paper explores the inherent relationship between industrial structure and the evolution of labour share,based on the background of current industrial structural transformation in China.Differing from the study of the change of industrial structure and labour share from the perspective of Engel's effect and technological progress,this paper argues that elasticity of factor substitution has a better ability to explain the unification of labour shares in different industrial structures,and factor misallocation is a distinctive feature with rich Chinese characteristics.Firstly,the empirical model is constructed to estimate the time series of elasticity of factor substitution and the directions of technical progress of three industrials.The estimated results of elasticity of factor substitution show that:The first one is:There are some differences in elasticity of factor substitution among three industries in China,among which elasticity of factor substitution in industry is the largest,elasticity of factor substitution in service is the second,and elasticity of factor substitution in agriculture is the least.The second one is:Elasticity of factor substitution within each industry shows an increasing trend over time.The technological progress of three industries is as follows:The first one is:From the point of view of technological progress of factor enhancement which reflects factor' efficiency,the agriculture has always been characterized as labour-enhanced,while the industry and the service industry shifted from capital-enhanced to labour-enhanced.The second one is:Factor-enhanced technological progress overlaps elasticity of factor substitution can obtain the factor biased technological progress,which can directly affect labour share.At present,the agriculture shows the capital bias,while the industry and the service industry show the labour bias.The results of the estimation of elasticity of factor substitution of China's three industry obtained in this chapter provide the data support for the preliminary analysis and detailed theoretical model analysis of the changes of industrial structure and labour share in the following chapters.Secondly,this paper analyzes the change of labour share corresponding to different stages of industrial structure through two paths of inter-industry and intra-industry,based on the results of empirical estimation.From the inter-industry effect:In the industrialization period when labour force is abundant,elasticity of factor substitution of the industry is higher than that of the agriculture,which can cause the labour force to shift from the agriculture to the industry,resulting in a decline of the overall labour share.In the deindustrialization with relatively abundant capital,the industry with higher elasticity releases the expensive labour force into the service industry,which promotes the process of deindustrialization.Increasing in the proportion of value added of service industry with higher labour share accounts for the improvement of overall labour share.From the perspective of intra-industry effect:In the industrialization period,the agriculture's production share is high,so the technological progress of capital bias in the agriculture pushes down overall labour share.In the period of deindustrialization with a high share of service industry,the technological progress of labour bias in the service industry pushes up overall labour share.The overall growth of elasticity of factor substitution within three industries drags down labour share in the three periods of industrialization,deindustrialization and relatively stable industrial structure.Thirdly,the trend of industrial structure and labour share in China is analyzed in detail theoretically under the influence of elasticity of factor substitution using a two-sector dynamic stochastic general equilibrium model.The result shows that labour.share in China has the trend of 'declining-increasing-declining' corresponding to the industrial structure stage of "industrialization-deindustrialization-relatively stable industrial structure".The specific performance is that:(1)Elasticity of factor substitution has difference between departments,which can cause the flow of labour force from agriculture to industry,then from industry to service industry.The transformation effect of industrial structure will further affect the change of labour share,which can explain the decline of share labour that began to emerge in the 1990s and the increase after 2007.(2)The growth of elasticity of factor substitution easily leads to excessive substitution of capital for labour,which can explain the possible decline of labour share after the industrial structure is relatively stable.Finally,this paper introduces factor misallocation with distinctive Chinese characteristics into the theoretical model,then discusses the differences of industrial structure and labour share in the two cases with or without factor misallocation.Under the combined influence of elasticity of factor substitution and factor misallocation,the trend of labour share shows the 'U-shaped' of 'declining-increasing,corresponding to the stage of 'industrialization-deindustrialization'.Compared with the situation of non-factor misallocation,factor misallocation may hinder the advance of industrialization and deindustrialization.On average,the presence of factor misallocation reduced the proportion of industrial labour by 26%during industrialization,and by 3%of labour force in service industry during deindustrialization.The adjustment of factor misallocation can help reduce the decrease of labour share in the industrial period by about 5.15%,but such role is not so significant when it comes to the deindustrialization period.This paper gives the law of the evolution of labour share in different industrial structures.It proves that there is a close relationship between the deindustrialization period and the rise of labour share in present China.It also points out the importance of elasticity of factor substitution and factor misallocation on industrial structure and primary income distribution.