Research On The Influencing Factors Of Labor Compensation Share

Since the 1990 s,the decrease of Chinese labor share run as a hindrance not only to narrowing the income distribution gap,but also transformation from investment startup to consumption startup.In this thesis,I investigate the relationship between elasticity of substitution(so called ?)and the labor share.Using the macro and micro dataset,such as statistical yearbook,and listed companies data on stock market,I find that the elasticity of substitution plays an important role in explaining the labor share's fluctuate.The elasticity of substitution exerts an meditation effect on the relationship between the relative price of production factors and labor share.As a result,whether its numerical value is bigger or smaller than 1 is decisive to how the relative price will influence the labor share.What's more,with the help of unconditional quantile regression with FFL decomposition model,I find the direct influence of elasticity of substitution on labor share.The bigger the elasticity of substitution,the larger the labor share.Those effect is quite significant with the companies of lower labor share.The thesis is constructed with following 5 parts.From chapter 1 to chapter 2,I introduce different researches about factor income distribution and elasticity of substitution.In chapter 3 and chapter 4,I study on the Chinese labor share and elasticity of substitution with data of enterprise level,industry level and national level.The relationship between elasticity of substitution and labor share is mainly investigated in chapter 5.And in chapter 6,I research on the heterogeneity of innovation and labor factor.At last,the cross-country comparison is conducted in chapter 7.The explanation of factor substitution effecting labor share can be illustrated from following 2 aspects.The capital deepening can be viewed as factor substitution at production procedure and the relative price is at distribution procedure.The former one is negative to labor share and the later one is negative to labor share.Those two types of labor substitution conflicts if the elasticity of substitution is bigger than 1.As a result,the relationship of those factors to labor share is determined by elasticity of substitution.With dataset of companies on stock market,I proved the mediation effect of the elasticity of substitution on labor share.The decomposition outcome of FFL model and unconditional quantile regression shows that the 25.68% of labor share changes are contributed by substitution factors.In chapter 6,the thesis talks about the influence of heterogeneity about technology changes and labor factor.On one hand,technology progress is the dynamic reason of economic growth and income distribution.However,technology progress hardly turns out to be neutral in real time.Different types of technology progress such as capital-augmenting and labor-augmenting technology changes play important role in explain labor share changes.Thus,the relative slow down of labor-augmenting technology changes explains recent decline of total labor share.On the other hand,“heterogeneity” can also be expanded by investigating labor factor.Both the wage and the quantum of skilled workers grow quickly in recent ten years.The estimation of elasticity of substitution among capital,skilled workers and unskilled workers show that the relationship between skilled and unskilled workers is complementary,and that between capital and each type of workers is substitution.The elasticity of substitution between skilled and unskilled worker is significant relative to the changes of labor share.According to the researches on dataset of nation level,the labor share in both developed and developing countries all emerged the phenomena of declining labor share,which overthrow the hypothesis of Samuelson.Basing on panel data analysis,I find the influence factors of global labor share are technology progress,capital deepening and elasticity of substitution with threshold effect.The influence of elasticity of substitution is negative when the per-capita GDP larger than 12745 USD and vice versa.China is currently crossing middle-income trap with labor share's influencing factor changing.Innovation points of my research contain the following 3 aspects.Firstly,I compute the elasticity of substitution on nation,industry and company level.With linear and nonlinear model,I estimate the elasticity of substitution in China and discuss its influence factors.What's more,I investigate the influence path of various factors to labor share.As capital deepening and relative price of product factors all playing important role in explaining labor share,the elasticity of substitution works as mediator of those relationships.Those comprehensive relationship is seldom realized by researchers and rarely testified with "real world" data.Finally,this research study on the relationship between elasticity of substitution and labor share through heterogeneity of technology progress and labor factor.On one hand,the declining speed of labor-augment technology progress is an important reason to the decline of labor share in recent years.On the other hand,the complementary of skilled and unskilled workers is significant factor to labor share of industries with high proportion of skilled workers.In this dissertation,I summarized 3 conclusions as below.Firstly,each industry in China has various level of labor share and elasticity of substitution.Some industries at some period has elasticity of substitution larger than 1.Under this circumstances,the regulation of workers' minimum wage will decrease the industrial labor share.Secondly,the effect of factor substitution on labor share embodies the price distortion and technology shock.And the elasticity of substitution is crucial to the validity of those effects.From a long-term perspective,improving labor share relies on the labor-augmenting technology progress.Thirdly,comparing between countries of different continents and different development phases,the labor share in China is under the transitional period of crossing the middleincome trap.The influence factor of it is changing during this period.The effect of elasticity of substitution will move from positive to negative.With the general trend of capital deepening,the labor share in China will continue to decline.At last,my thesis get 3 suggestions.Firstly,heavy industry oriented development strategy is the underlying cause of the low level labor share in China.Developing service industries and transferring the economic growth dynamic from investment to consumption will increase the total labor share.What's more,the elasticity of substitution is different among various industries.Combining minimum wage regulation and employment expanding is sometimes contradictory but also effective to improve labor share according to different value of elasticity of substitution.At last,in the long run,boosting laboraugmenting technology progress is effective to improve labor share.Innovation is long term power to economic growth and labor share increase.