The Evolution of Chinese Labor Share and Drivers based on Manufacturing during 1998-2016
YIN Heng, ZHANG DaoYuan, LI Hui
National Academy of Development and Strategy, Renmin University of China; Institute of Finance, Shandong Academy of Social Sciences; Economics and Management School, Wuhan University
Summary:
Labor share refers to the proportion of compensation received by workers in newly created value within a country or region during a specific period. This indicator reflects the distribution of national income between workers and capital owners, and is crucial for understanding income distribution patterns and promoting sustainable economic development. For a long time, the labor share in many countries has remained relatively stable, a phenomenon that Kaldor included as one of the “stylized facts” of economic growth. However, doubts about the stability of labor share have persisted. In recent years, the global trend of declining labor share has attracted widespread attention and discussion in academic circles. As the world's second-largest economy, changes in China's labor share have significant implications for the global economic landscape. Although existing research has extensively examined China's labor share from a macroeconomic perspective, the calculation of labor share at the macro level is highly sensitive to the accounting scope of labor compensation. Moreover, macro-level analyses often rely on simplified micro-environment settings, sacrificing the rich information contained in micro-heterogeneity, resulting in an “incomplete explanation” of labor share changes and their influencing factors.
In light of this, this paper attempts to examine the evolution of China's labor share and its driving factors from a micro perspective to address the limitations of existing research. We combine the China Industrial Firm Database and the National Tax Survey Database to construct a large-sample firm dataset with broad coverage and a long time-span. Based on this dataset, we describe the trends in China's labor share from 1998 to 2016, employ various decomposition methods to identify the underlying driving forces, and quantify the impact of various factors through a structural estimation model. Our findings are as follows: First, China's labor share exhibited a distinct U-shaped trend between 1998 and 2016, with 2007 as the lowest point. Notably, the labor share across all industries consistently rose after the 2008 financial crisis. This finding provides micro-level support for the upward trend in macroeconomic labor share during the same period. Second, dynamic decomposition results show that incumbent firms are the main contributors to the evolution of labor share in the manufacturing sector during the sample period, with their contribution to total labor share changes exceeding four times the combined contribution of entering and exiting firms. Third, decomposition results of the wage-to-sales revenue ratio indicate that understanding the significant slowdown in per capita sales growth relative to per capita wage growth for incumbent firms after 2007 is key to exploring the driving factors behind the U-shaped reversal of labor share during the sample period. Fourth, structural estimation results show that demand-side factors, represented by markup rates, can only explain a small portion of the changes in labor share, while production-side scale effects are not the main drivers of labor share changes. Considering all evidence, this paper argues that biased technological progress or changes in labor market institutions are likely the key factors behind the reversal of China's declining labor share trend after 2007.
The potential contributions of this paper are threefold: First, it provides new micro-evidence for the U-shaped reversal of China's labor share based on a large-sample firm database. Second, it broadens the approach of analyzing and evaluating the driving forces of labor share by decomposing them into production-side and demand-side based on firm optimization behavior and constructing a structural estimation system to separate the effects of different factors. Finally, it excludes the possibility of production-side scale effects and demand-side product market power acting as primary influencing factors. This notably differs from recent conclusions on the driving forces of U.S. labor share, which found demand-side firm market power to be the main cause.
It should be noted that as an initial attempt to explore the evolution of China's labor share and its underlying driving factors from a micro perspective, this paper has evident limitations and room for improvement. First, we were unable to directly estimate labor-augmenting productivity, thus limiting our ability to further discuss its mechanism of influencing labor share in depth. Second, our model does not consider labor market frictions, making it impossible to directly evaluate the impact of labor market institutional factors on labor share. How to simultaneously identify multiple dimensions of firm heterogeneity, such as the direction of technological progress, product market monopoly power, labor market monopoly power, and labor adjustment costs, in one comprehensive model and directly assess their impact on Labor share remains a challenging issue and a worthwhile direction for future research.
尹恒, 张道远, 李辉. 中国劳动收入份额的演变趋势及基于制造业的驱动力探索[J]. 金融研究, 2024, 529(7): 152-169.
YIN Heng, ZHANG DaoYuan, LI Hui. The Evolution of Chinese Labor Share and Drivers based on Manufacturing during 1998-2016. Journal of Financial Research, 2024, 529(7): 152-169.
[1]龚刚和杨光,2010,《从功能性收入看中国收入分配的不平等》,《中国社会科学》第2期,第54-68+221页。 [2]焦音学和柏培文,2020,《三大产业劳动收入份额、经济增长及收入差距》,《数量经济技术经济研究》第4期,第26～45页。 [3]蓝嘉俊、方颖和马天平,2019,《就业结构、刘易斯转折点与劳动收入份额:理论与经验研究》,《世界经济》第6期,第94～118页。 [4]李稻葵、刘霖林和王红领,2009,《GDP中劳动份额演变的U型规律》,《经济研究》第1期,第70～82页。 [5]刘啟仁和黄建忠,2016,《产品创新如何影响企业加成率》,《世界经济》第11期,第28～53页。 [6]刘亚琳、申广军和姚洋,2022,《我国劳动收入份额:新变化与再考察》,《经济学(季刊)》第5期,第1～22页。 [7]卢国军、崔小勇和王弟海,2023,《自动化技术、结构转型与中国收入分配格局的演化》,《金融研究》第4期,第19～35页。 [8]陆雪琴和田磊,2020,《企业规模分化与劳动收入份额》,《世界经济》第9期,第27～48页。 [9]罗明津和铁瑛,2021,《企业金融化与劳动收入份额变动》,《金融研究》第8期,第100～118页。 [10]聂辉华和贾瑞雪,2011,《中国制造业企业生产率与资源误置》,《世界经济》第7期,第27～42页。 [11]施新政、高文静、陆瑶和李蒙蒙,2019,《资本市场配置效率与劳动收入份额——来自股权分置改革的证据》,《经济研究》第12期,第21～37页。 [12]文雁兵和陆雪琴,2018,《中国劳动收入份额变动的决定机制分析——市场竞争和制度质量的双重视角》,《经济研究》第9期,第83～98页。 [13]杨汝岱,2015,《中国制造业企业全要素生产率研究》,《经济研究》第2期,第61～74页。 [14]张车伟和赵文,2015,《中国劳动报酬份额问题——基于雇员经济与自雇经济的测算与分析》,《中国社会科学》第12期,第90-112+206-207页。 [15]张杰、卜茂亮和陈志远,2012,《中国制造业部门劳动报酬比重的下降及其动因分析》,《中国工业经济》第5期,第57～69页。 [16]赵秋运和张建武,2013,《中国劳动收入份额的变化趋势及其驱动机制新解——基于国际贸易和最低工资的视角》,《金融研究》第12期,第44～56页。 [17]Acemoglu, D. 2002. “Directed Technical Change”, The Review of Economic Studies, 69(4): pp.781～809. [18]Ackerberg, D.A., K. Caves, and G. Frazer. 2015. “Identification Properties of Recent Production Function Estimators”, Econometrica, 83(6): pp.2411～2451. [19]Autor, D., D. Dorn, L.F. Katz, C. Patterson, and J. Van Reenen. 2020. “The Fall of the Labor Share and the Rise of Superstar Firms”, The Quarterly Journal of Economics, 135(2): pp.645～709. [20]De Loecker, J., J. Eeckhout, and G. Unger. 2020. “The Rise of Market Power and the Macroeconomic Lmplications”, The Quarterly Journal of Economics, 135(2): pp.561～644. [21]De Loecker, J. and F. Warzynski. 2012. “Markups and Firm-level Export Status”, American Economic Review, 102(6): pp.2437～2471. [22]Doraszelski, U. and J. Jaumandreu. 2018. “Measuring the Bias of Technological Change”, Journal of Political Economy, 126: pp.1027～1084. [23]Elsby, M.W., B. Hobijn, and A. Şahin. 2013. “The Decline of the US labor Share”, Brookings Papers on Economic Activity, 2013(2): pp.1～63. [24]Grossman, G.M. and E. Oberfield. 2022. “The Elusive Explanation for the Declining Labor Share”, Annual Review of Economics, 14(1): pp.93～124. [25]Kaldor, N. 1955. “Alternative Theories of Distribution”, The Review of Economic Studies, 23(2): pp.83～100. [26]Karabarbounis, L. and B. Neiman. 2014. “The Global Decline of the Labor Share”, The Quarterly Journal of Economics, 129(1): pp.61～103. [27]Kehrig, M. and N. Vincent. 2021. “The Micro-level Anatomy of the Labor Share Decline”, The Quarterly Journal of Economics, 136(2): pp.1031～1087. [28]Keynes, J.M. 1939. “Relative Movements of Real Wages and Output”, The Economic Journal, 49(193): pp.34～51. [29]Krueger, A.B. 1999. “Measuring Labor's Share”, American Economic Review, 89(2): pp.45～51. [30]Melitz, M.J. and S. Polanec. 2015. “Dynamic Olley-Pakes Productivity Decomposition with Entry and Exit”, The Rand Journal of Economics, 46(2): pp.362～375. [31]Oberfield, E. and D. Raval. 2021. “Micro Data and Macro Technology”, Econometrica, 89(2): pp.703～732. [32]Olley, G.S. and A. Pakes. 1996. “The Dynamics of Productivity in the Telecommunications Equipment”, Econometrica, 64(6): pp.1263～1297. [33]Solow, R.M. 1958. “A Skeptical Note on the Constancy of Relative Shares”, The American Economic Review, 48(4): pp.618～631. [34]Yeh, C., C. Macaluso, and B. Hershbein. 2022. “Monopsony in the US Labor Market”, American Economic Review, 112(7): pp.2099～2138.
