Abstract

http://ssrn.com/abstract=1734195
 
 

References (37)



 


 



Declining Labor Share: Is China's Case Different?


Changyuan Luo


affiliation not provided to SSRN

Jun Zhang


Fudan University - China Center for Economic Studies (CCES)


China & World Economy, Vol. 18, No. 6, pp. 1-18, 2010

Abstract:     
This paper explores why labor share in China has declined since the middle of the 1990s. Existing literature usually ascribes the labor share decline in developed countries to biased technological progress. However, our investigation shows that China's case is different. Using a simultaneous equation model estimated with three-stage least squares, we find that FDI, levels of economic development and privatization have negative effects on the labor share. The negative influence of FDI on labor share results from regional competition for FDI, which weakens labor forces' bargaining power. A U-shaped relationship exists between labor share and the level of economic development, and China is now on the declining part of the curve. The negative effects of privatization on the labor share stem from the elimination of the so-called "wage costs eroding profit" situation and the positive supply shock on the labor market.

Number of Pages in PDF File: 18

Keywords: economic development, globalization, labor share, privatization

JEL Classification: E25, F16, O11

Accepted Paper Series





Date posted: January 3, 2011  

Suggested Citation

Luo, Changyuan and Zhang, Jun, Declining Labor Share: Is China's Case Different?. China & World Economy, Vol. 18, No. 6, pp. 1-18, 2010. Available at SSRN: http://ssrn.com/abstract=1734195 or http://dx.doi.org/10.1111/j.1749-124X.2010.01217.x

Contact Information

Changyuan Luo
affiliation not provided to SSRN
No Address Available
Jun Zhang (Contact Author)
Fudan University - China Center for Economic Studies (CCES) ( email )
China
Feedback to SSRN


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