Share Of Labor Income In China

Nowadays China is in the transition period of dual economy and at the same time China is becoming more and more open to the world day by day. However the labor's share of China declines as time passed so it's significant to study the influence of openness and the transition of dual economy.First, this paper utilizies the concept of labor's share to construct a formular of decompositing labor share's increasing rate and finds out labor share's increasing rate is determined by three factors:the multiplier, per capita capital increasing rate and Hicksian factor biased technology.If the multiplier is bigger than zero, the capital can increase labor's share and if the multiplier is smaller than zero, the capital will decrease labor's share. In case the absolute value of multiplier is bigger than 1, the multiplier will amplify the impact of capital on labor's share and if the absolute value of multiplier is smaller than 1, the multiplier will diminish the impact of capital on labor's share. Capital saving technology will increase labor's share and labor saving technology will decrease labor's share. Then the paper decomposes labor share increasing rate of manufacturing industry in China and industrial sector both in China and in the USA. By doing this the paper put forward some advice for stabilizing labor's share from the point of view of technology and capital.Then the paper tries to explain the reasons for conflicting phenomenon of China'share labor share with the Stolper-Samuelson Theorem. It finds out that international trade will generate negative technological effect on labor's share which is offset the positive income effect generated by international trade. This explains why labor's share of China is declining accompanied with openness. This paper also does some empirical study use data from 29 province during 1987 and 2006 and gives some policy suggestion for increasing labor's share of China from view of international trade.On the other hand, this paper research the influence of FDI on labor's share using probability theory and game theory. It finds out that the influence of FDI on labor's share indicating a U-shape curve which means when the amount of FDI is low, FDI tends to decrease labor's share and when the amount of FDI exceeds some turning point, FDI tends to increase labor's share. This paper also does some empirical study on this aspect using the data from China's province during 1995 and 2007. Then it gives some political advice from FDI point of view.Finally this paper research the effect of transition of dual economy on labor's share and finds out before the first Lewis turing point labor's share declines while economy is transiting and after the first Lewis turning point the transition process has an n-shape effect on labor's share which means at first labor's share raises during transition process and after some time labor's share declines during transition process. At last the paper incorporates openness factor into dual economy system and research systematically. It finds out that both international trade and FDI have three kinds of effects on labor's share:labor transition effect, factor income effect and technology effect. The factor income effect of international trade is positive at first then turns to be negative. The technology effect of international trade is negative all the time. The labor transition effect of international trade is positive at the first phase of dual economy and accelerates the formation of n-shape curve at the second phase of international trade. At the end of dual economy the labor transition effect is zero due to the end of transiting of labor force. The factor income effect of FDI is negagtive at the first phase of dual economy and then turns to be positive at the second phase. The labor transition effect of FDI is negative at the first phase of dual economy and accelerates the formation of n-shape curve at the second phase of international trade. At the end of dual economy the labor transition effect is zero due to the end of transiting of labor force. At the last part the paper does some empirical study using cross-country data and gives some political advice to stabilize labor's share.