On The Determination Of Labor Share

The dissertation is about theory of capital-labor distribution and its applications. It finishes three major tasks:first, review, compare and evaluate the capital-labor theories of Neo-Claasical, Marxian and Post-Keynesian economics, by which the author criticizes the Neo-Classical distribution theory, while disentangling the relations and complementarity between Marxian and Neo-keynesian distribution theories. Second, by combining Marxian and Post-Keynesian theories, analyze the determination of labor share, which means the systematic determinants of labor share and the imapcts and reactions of the determinants, and then put forward some propositions and inferences. Third, make empirical researches into the labor share and relevant problems of China, so as to prove the propositions and inferences, and then put forward some implications and policy suggestions.In theories review and criticism, the author reviews and criticizes the capital-labor distribution theories of the three major schools of modern economics, namely, Neo-Classicism, Marxism and Post-Keynesianism. It asserts that the Neo-Classical distribution theory has inevitable shortfalls in its philosophy foundation and knowledge construction. The theory is unable to explain the capital-labor distribution in the real world, neither able to guide the distribution practices.In contrast, Marxism and Post-Keynesianism inherit common precious traditions from the Classical economics, which make them compatible in nature, and complementary in their focuses. By comparative analysis of their branches, including Classical Marxism, Neo-Marxism, and Neo-Ricardian, Kaleckian and Neo-Cambridge schools, the author figures out two theory strands about capital-labor distribution, namely,’Marx (Gordon)-Sraffa-Kalecki’(MSK) strand and’Marx (Goodwin)-Kaldor-Robinson’(MKR) strand. The former focuses on the socioeconomic determination of capital-labor distribution, or the potential equilibrium of labor share, which is determined independent of the price system, while the latter focuses on the cyclical fluctuations of labor share around the potential equilibrium level, driven by expectations and effective demand, with socioeconomic background given. Capital-labor distribution is right the core of economic thoughts and their backup ideaology. Choice of the capital-labor distribution theory directly relates to the political position and economic policy. To realign the orientation of our reform of income distribution or even the whole economic system, we have to overturn the domination of Neo-Classicism, and reshape the mainstream ideaology based on the synthesis of Marxism and Post-Keynesianism.In the theory synthesis and application, the author analyzes the static and dynamic determination of labor share, based on MSK strand and MKR strand, respectively. The static part omits the influences of expectations and effective demand. It asserts that, capital-labor distribution on the macro level is dominated by the rule of surplus value; macro labor share is in reverse relation with the ratio of surplus value. The ratio is overdetermined by a complex of institutional arrangements, named SSA (social structure of accumulation), with specific mode of production as its core and many supportive factors including market structure, powerof labor union, technology system and government participation. Markup, technology composition and wage rate of every industry determines the redistribution of aggregate surplus value among the industries. For each industry, deviation of its markup, technology composition and wage rate from the average levels determines deviation of its labor share from the aggregate level, or whether it get (or render) surplus value as subsidy from (to) other industries. The dynamic dtermination investigates the labor share dynamics in the historical time under the impacts of uncertain expectations and effective demand. It asserts that labor share is in reverse relation with investment rate. Along with the chain reactions of profit expectation, investment expenditure, employment rate, capacity utilization, wage rate and price level, the labor share tends to fluctuate anti-cylicaly. In the long run, labor share influences growth. In accordance with the relative sensitivities of the investment expenditure to profit share and capacity utilization, respectively, growth can be wage-led or profit-led. For the wage-led growth, rising labor share can improve growth rate, which means equality and efficiency are compatible; while for the profit-led growth, rising labor share can lower growth rate, which means equality and efficiency need trade-off.In empirical research and implications, the author gets empirical evidences for the theory propositions and inferences based on data analysis, and explains the labor share trend and relevant issues of China along the way. Main findings include:(1) Declining labor share in the recent years in China is attribute to the expansion of capitalist sectors (i.e. sectors with capitalist mode of production) and the rising ratio of surplus value.(2) The ratio of salary share to wage share keeps increasing, because of rising proportion of salary labor and widening gap between salary level and wage level.(3) decompose the differences of industry-level labor into differences of markup, technology composition and wage rate; the markup relates positively to the output share of State Owned Enterprises (SOEs), industry concentration and fixed assets per head, while negatively to the technology composition; the wage rate relates positively to the employment share of SOEs and technology composition. High markup and high wage rate of some monopoly SOEs squeeze the labor share and profit rate of downstream industries.(4) Declining labor closely relates to the problem of excess capacity; over dependence on investment to stimulate growth may leads to vicious cycle of declining labor share and excess capacity.(5) Now China has entered the pahse of wage-led growth; rising labor share can stimulate growth, which means that capital-labor relation is cooperative other than antagonistic, efficiency and equality are compatible other than contradictory.Form the empirical outcomes, we can get the following implications:(1) Both from the positive side and normative side, it’s necessary to increase the labor share; free market fundamentalism can’t be the right guide.(2) The domination position of SOEs should be treated dialectically. We should expand the employment coverage of normal SOEs, while for the minority monopoly SOEs, competition should be introduced and profit delivering proportion should be increased.(3) Income distribution determines the industry structure, other than the opposite. We must break up the myth of so-called upgrading of industry structure, since industry structure has nothing to do with the grade, rather matters whether fitting the given distribution and demand structure. At present in China, consumption goods manufacture and consumption service industries will expand at most following distribution improvement.(4) At present in China, a bigger mass of stable, affluent and united industrial workers are in most need, instead of more white-collar elites. To reach the goal, we should eliminate the employment discrimination, promote the rural immigrants become fairly treated urban workers; strengthen the power and independence of labor union; reform the incentives of local government and taxation system, to establish the institutional environment prioritize employment, livelihood and labor rights.