The Analysis Of Decrease Of Labor Shares

The aim of this paper is to study whether the process of China’s financialization will affect the changing of labor shares from the perspective of financialization.This paper analyzed first 1995-2009 China’s financial process through collecting and collating relevant data from "China Statistical Yearbook", "China Financial Statistics Yearbook", "China Securities and Futures Statistical Yearbook", "China Labor Statistical Yearbook", Wind databases and China Bond Information Network. And then analyzed the correlation between declining of labor shares in non-financial corporate sector and the declining in financial sector.We found that China’s economy has indeed begun the process of financialization like western developed countries through analyzing the current situation of China’s financialization. China’s current financialization has developed in the intermediate stage of securitization and the early stage of virtualization. The securities markets and virtual economy has yet to be developed and improved. There is still a large gap between the China’s financialization and western developed countries’financializationAfter that, the paper conducted two Johansen cointegration tests. The first test viewed SN (the ratio of labor shares and capital compensation share in the non-financial corporate) as explained variable and LOGRC, LOGRS and LOGRD (financialization indicators) as explanatory variables. The second test viewed SF (the ratio of labor shares and capital compensation share in the financial institutions) as explained variable and LOGRC, LOGRS and LOGRD (financialization indicators)as explanatory variables. These two cointegration showed that there is cointegration equation between the explained variable and the explanatory variables. It means that the process of China’s financialization affected the labor shares declination in the opposite direction in the non-financial corporate and financial institutions. Not only in the non-financial corporates but also in the financial institutions the ratio of labor sharess and capital compensation share declining as the development of financialization. We can use the development of financialization to explain the phenomenon of labor shares declination. But these Johansen cointegration tests also showed that the speed of labor shares declination are different between non-financial corporate and financial institutions. The labor shares declined faster in the financial institutions but slower in the non-financial corporate. It verified the level of China’s financialization is far from western developed countries’financialization level. Although financialization has made an impact on non-financial corporate sector, but the effect is not significant.This paper also explored the specific mechanism in the influence of financialization to the decline of labor shares from the perspective of industrial structural, corporate and laborers.