The Effect Analysis Of Labor Factor Income Share On Income Distribution Gap

With reform and opening up for30years, the economy in China has undergonetremendous and profound changes. As the economy develops steadily and rapidly, andpeople’s lives continue to be improved, the income gap becomes widened. Since theGini coefficient exceeded the warning level of0.4in2000, it has been showing a slowupward trend. Recently, income disparities have become a hot topic in the social andeconomic life. Meanwhile, the factor income share changes, especially the recentstatus that the labor share declines and the share of capital income rises draws thecommunity’s attention. Considering the factor income share into account, it reflectsthe society begin to focus on labor income. We should correctly realize the status quoof China’s income distribution. By the factors analysis of income gap in China,especially the factor income share, we can deeply understand the root of the wideningincome gap, by which we can put forward some appropriate policy recommendations.It is of great theoretical and practical significance.This paper examines the basic conditions of the pattern of income distributionsince the reform and opening up in China. We analyze the income gap, regionaldisparities, the gap between industry and inter-provincial income gap from thenational level and provincial level, and find income gap has a widening trend in China.The rural and urban Gini coefficient of18provinces excesses the warning area of0.4-0.5in21sample cities of2009, five of which has a poor performance inrural-urban income gap. This paper examines the basic conditions of the pattern ofincome distribution since the reform and opening up in China. We analyze the incomegap, regional disparities, the gap between industry and inter-provincial income gapfrom the national level and provincial level, and find income gap has a widening trendin China. The rural and urban Gini coefficient of18provinces excesses the warningarea of0.4-0.5in21sample cities of2009, five of which has a poor performance inrural-urban income gap. The meaning, the status quo and the impact mechanism of thefactor income share on the income gap is analyzed and found that workerscompensation began to decline in1995, while the capital share and net taxes onproduction increased. In inter-provincial factor shares, labor income share isrelatively low for the province in the eastern region, relatively high provincesgathered in the west. By the analysis of impact mechanism of factor income, we know factor incomeShare would compact the income gap. as a measure of income inequality, the Ginicoefficient is introduced to analyze the seriousness of income gap. By the analysis ofimpact factors, we can obtain the following results:(1) Factor income share is animportant factor of the income gap.(2) The paper can‘t prove the inverted U-shapedrelationship between economic development and income gap, and economicdevelopment factors is the greatest factor in rural-urban income gap.(3) Theempirical results of public goods and infrastructure is not statistically significant, aswell as institutional factors. Finally, based on the empirical analysis results, this papersuggest that the government should deeply reform the income distribution system,improve the social security system, and increase the social construction of publicgoods on the basis of both efficiency and equity, which is the basic policy to solve theincome gap between urban and rural residents.