Font Size: a A A

Labor Share,Economic Fluctuations And Economic Growth

Posted on:2019-06-10Degree:DoctorType:Dissertation
Country:ChinaCandidate:F L YuanFull Text:PDF
GTID:1367330548950248Subject:Western economics
Abstract/Summary:PDF Full Text Request
Since the reform and opening up,China has made remarkable achievements in economic development which has attracted world attention,keeping high speed growth for more than thirty years and creating the miracle of economic growth at a high speed for a long time in the history of the world.After more than thirty years of rapid development,China exceeded Japan and became the world's second largest economy behind the US in 2010.With the rapid development of China's economy,China's economic growth mode shows obvious phase changes.Since 1978,China's economic growth model has undergone the following phase transitions:"domestic consumption led"-"consumption-Investment led"-"investment-export led"-"investment led".In addition,the various shocks caused by important events or policies have also caused considerable short-term fluctuations in China's macro-economic operation,and therefore the GDP growth rate is significantly different in different time periods.Since 1978,with high speed growth in the long-term and large amplitude fluctuations in the short-term in China's economy,China's labor income has also undergone a large change,and especially since the beginning of 1990s,the labor share has shown a significant downward trend.The first concern of this paper is:what is the correlation between the changes of labor share and short-term economic fluctuations in China?Is the great changes in China's labor share also associated with the short-term macroeconomic fluctuations in the economic cycle,in addition to the medium and long term changes caused by factors such as capital deepening and industrial structure change?Are changes in the labor share also a source of impact on China's macroeconomic fluctuations?This paper will first examine the relationship between the fluctuations of labor share and the fluctuations of productivity as well as the relationship between the fluctuations of labor share and the fluctuations of output from empirical evidence in China,and study the fluctuation characteristics of China's labor share in the economic cycle.Secondly,the variability of factor income shares is introduced into the standard RBC model,and a dynamic stochastic general equilibrium(DSGE)model,which includes productivity shocks and factor income share shocks,is constructed to reexamine the effect of productivity shocks on explaining real economic fluctuations,and to study the effect of the fluctuations of labor share in the economic cycle.The conclusions are as follows:Firstly,labor share is quite volatile,highly persistent as well as counter-cyclical in China.Secondly,there are two reasons for why labor share is counter-cyclical.labor share has dynamic overshooting response to productivity innovations,which indicates that labor reward lags behind real output growth.In addition,When labor share's positive shocks occur,all other economic variables showed negative responses except labor input.The counter-cyclical nature of China's labor share in short-term economic fluctuations has been an important reason for its decline;Thirdly,labor share shocks will also have an impact on the macroeconomic variables such as output,investment,consumption and labor input,and the impact of labor share on investment,especially labor input,is relatively large.The second concern of this paper is:what is the correlation between the changes of labor share and long-term economy growth in China?Many domestic scholars consider that the decline in labor share leads to under-consumption and therefore has a negative effect on economic growth.However,if the decline in labor share has a negative effect on economic growth,why has China kept high speed growth over the past more than 30 years?Does the decline in labor share have a positive or negative effect on economic growth and productivity growth,and how big is the effect?In the nineteen major reports of the Party,it is proposed to realize the "two synchronization",that is,to realize simultaneous increase in household income with the economic growth,and to realize simultaneous increase in labor rewards with the productivity growth.So,in the long run,what is the interaction mechanism between the total output,the labor productivity and the actual wage level,and how to realize the "two synchronization" smoothly?Based on the improvement of the Naastepad(2006)model,this paper constructs an economic growth model which integrates a demand regime and a productivity regime for changes in income distribution,and makes an empirical study based on the time series data from 1978 to 2015 in China,to study the effects of changes in income distribution on economic growth and productivity growth in China.The main findings are as follows:Firstly,China's demand growth is mainly "profit-led",and as the proportion of exports and investment in GDP kept rising in past years,the economy became more and more strongly "profit-led".During the whole sample period,if labor share growth increase by 1 percentage point,the total demand growth fall by 0.67 percentage points on average;Secondly,the rising of real wages has a positive effect on labor productivity,with the elastic coefficient is 0.34.The total output growth will also have a positive effect on labor productivity,and the Verdoorn effect is relatively stronger,with the elastic coefficient is 0.65;Thirdly,when combining the demand regime together with the productivity regime,in the sub-sample period from 1978 to 1991,if labor income share increase,the output effect is negative,and the productivity effect is positive;in other sub-sample periods,if labor income share increase,the output effect and the productivity effect are both positive,and the positive effect is more and more strong as time goes on;during the whole sample period,if labor income share growth increase by 1 percentage point,the total output growth fall by 0.78 percentage points on average,and the labor productivity growth fall by 0.17 percentage points on average.Forthly,As China's economic development gradually shifts from being factor-driven and investment-driven to being innovation-driven,the conditions for China's demand regime shifting from being "profit-led" to being "wage-led" have already formed or are forming.Once a wage-led regime is realized,the sustainable development mode of "high wage-high demand-high productivity" can be formed,and the "two synchronization" can be realized smoothly.The third concern of this paper is:is there any correlation between the changes of labor share and the phased transformation of China's economic growth mode as well as the successful transformation in the future?This paper estimates the contribution share of domestic consumption,domestic investment and domestic export to GDP growth by allocating the import among different expenditure components appropriately,and on this basis,the economic growth mode of China from 1978 to 2015 is divided into four stages.The main findings are as follows:Firstly,the decline of labor share has become a driving force behind the phased transformation of China's economic growth mode.Secondly,At present,China's economic growth model which is investment-driven needs to be transformed urgently,and the goal is to try to realize the "domestic consumption-driven" economic growth model.We should create favorable conditions to make China's demand regime shift from being profit-led to being wage-led.Then,when raising labor share,the "domestic consumption-driven"economic growth model can be successfully realized and the rapid growth of China's economy can be maintained simultaneously.
Keywords/Search Tags:labor share, business cycle, demand regimes, productivity regimes, economic growth mode
PDF Full Text Request
Related items