The Study On The Impact Of The Labor Income Share On Consumption Demand Of Anhui Province

In initial distribution, China’s share of labor income was declined and the decreasing degree was very significant. Because these have produced a series of social and economic problems, the Party and the government has to increase the share of labor compensation as an important aspect of improving people’s livelihood. But at present domestic and foreign studies mainly focus on the changing trend and the influence factors which could lead to the changes in income share of labor, while few studies discuss the changes in labor share affect consumption demand. Anhui Province is a populous province, development level is not high and its consumption demand is obviously insufficient. Therefore, it is very important to study the impact of the labor income share on consumption demand of Anhui Province.Firstly, the paper makes a descriptive analysis on the changes of labor income share and consumption status. In an overall view, the labor income share in Anhui Province has in a downward trend since the1990s.Although with a weak recovery in2009,it did not reverse the overall downward trend. Analysis on different department and different industries, we found that the development on labor share in department and industries is not balanced. By comparing with the national and other parts of China, we found that the labor income share decline too fast in Anhui Province, so it must be given highly priority. Analysis on the scale and level of consumption among rural residents, urban residents and government, we found the consumption of rural residents is too low and the distribution of consumption among three main subject is unreasonable.Then, the paper adopts normative and empirical analysis method to analyze the labor income share of Anhui Province impact on final consumption rate and consumption structure among rural residents, urban residents and government. Based on establishing the model of granger causality Tests, co-integration and error correction model, we found that:labor income share in Anhui Province rises a unit, final consumption rate of rural residents will increase1.9162units, final consumption rate of urban residents will decrease0.7104unit, and final consumption rate of government will decrease0.1088unit. Labor income share rises1%,the proportion of food consumption of rural residents decreased by0.3574%,but the proportion of consumption of urban residents are not affected directly. So, improving the labor income share can promote consumption and optimize the consumption structure.Based on the view proposed, the paper concluded that improving the labor income share of Anhui Province is an effective way to promote consumer demand and economic growth. Finally, the paper proposes suggestions to increase the labor income share including:play the guide role of government; accelerate industrial restructuring; fully use of labor union function; optimize the educational structure.