Capital And Labor Misallocation In Chinese Manufacturing Industry

China is in the crucial period of changing the mode of development,optimizing the economic structure and transforming the driving force of growth.,during which the mode of economic development is changing from high-speed growth pattern to high-quality development The structural contradiction of supply side resource misallocation has become an important constraint to meet the people's growing needs for a better life.Manufacturing industry is the main body of China's real economy,the main battlefield of technological innovation,and also an important field of supply side structural reform.It is of urgent realistic meaning and important practical significance to deeply understand and solve the problem of manufacturing resource misallocation and promote the high-quality development of manufacturing industry.This paper focuses on the misallocation of capital and labor force in China's manufacturing industry,and carries out research work by the logic of "what is,what will,what to do",focuses on the caculation of misallocation,the effect of misallocation on labor income share and the improvement path in the view of openning,so as to provide theoretical and empirical evidence for understanding the resource misallocation in China.Firstly,through literature review,the concept definition and measurement method of resource misallocation are clarified.This paper concentrates on the misallocation of capital and labor,and use the profit function method to measure the multi-dimensional and long-term trend of resource misallocation in China's manufacturing industry.Then the resource misallocation is introduced into the factor income share decomposition,and it is found that the resource misallocation affects the labor income share through influencing the factor productivity.Based on the industry data,the labor income share of China's manufacturing industry is decomposed,and the absolute impact of resource misallocation is calculated.Finally,the research on the improvement path of resource misallocation in China has been put in the background of opening up,and the improvement effect and micro mechanism of the information opening brought by the wide application of the Internet and the change of foreign investment access policy has been explored.The main contents and conclusions of this study are as follows:First,“what is”--What is the current situation of resource misallocation in China's manufacturing industry? Based on the heterogeneous enterprise monopoly competition model proposed by Hsieh and Klenow(2009),the theoretical analysis assums that there are capital misallocation and labor misallocation in the market.The assumption of constant return to scale is relaxed and the optimal production decision is solved.The results show that capital misallocation and labor misallocation lead to efficiency loss by distorting the marginal product value of factors.Based on the data of manufacturing enterprises in China's industrial enterprise database from 1998 to2013,this paper estimates the efficiency loss caused by resource misallocation,capital misallocation and labor misallocation from three dimensions of province,industry and ownership.The results show that the resource misallocation has been improved and the efficiency loss has been reduced during 1998-2013.From the long-term trend,the overall resource misallocation and capital misallocation develop in a W-shape,and efficiency loss changes.Labor misallocation is improving as a whole,and the efficiency loss caused by labor misallocation is gradually reduced.Second,“what will”—what will happen to labor income share encounters misallocation? This paper introduces the capital misallocation and labor misallocation into the industry profit function,decomposes the labor income share change of the industry theoretically,and explores the impact of resource misallocation on the factor income share.This paper enriches the study of the economic results of misallocaton besides total factor productivity.The results show that the change of labor income share comes from the effect of biased technological progress caused by biased technological progress,the capital deepening effect caused by the change of factor intensity,and the resource misallocation effect caused by the distortion of factor market.Based on the data of manufacturing industry,this paper constructs the standardized supply side function systerm,solves the substitution elasticity of factors,and decomposes the change of labor relative income share of various industries in China.The results show that the effect of resource misallocation on labor relative income share is negative.The influence of resource misallocation on labor relative income share is second only to biased technology progress effect,and the absolute impact of resource misallocation effect first decreases and then increases.Correcting misallocation is meanful to the increase of labor income share and the improvement of distribution of factor income.Third,“what to do”—what to do to relieve resource misallocation? In this paper,the research on the improvement path of resource misallocation is put in an open context,and the open of information and the open of foreign investment are analyzed.Taking the development of Internet development as the represent of information opening.This paper selects historical data as the instrumental variable of the Internet,and uses two-stage least squares method for empirical analysis.The results show that the increase of Internet penetration rate relieves the resource misallocation and the allocation efficiency of capital and labor.The Internet has heterogeneous effects on different industries and regions.The extensive use of the Internet has the greatest effect on improving the overall allocation efficiency of low-tech industries.It also improves the labor allocation efficiency of labor-intensive industries and capital allocation efficiency of capital intensive industries more and plays a more significant role in improving the efficiency of resource allocation in east and central China.The micro mechanism analysis shows that:(1)the Internet accelerates the information circulation,reduces the enterprise management costs and promotes the rational allocation of resources by breaking the information transmission barriers;(2)the Internet enhances the market competition,promotes the survival of the fittest,makes resources flow from low productivity enterprises to high productivity Enterprises,and improves the efficiency of market resource allocation.On the impact of foreign investment on resource misallocation,this paper uses the difference in difference method to make an empirical analysis based on the change of foreign investment access policy in 2002.The results show that the increase of foreign investment relieves the misallocation of resources and improve the efficiency of capital and labor allocation.The heterogeneity analysis shows that foreign investment is helpful to alleviate the resource misallocation of medium and low technology industries,more significantly to correct the resource misallocation of high tech industries,and more helpful to alleviate the resource misallocation in the east region.Micro mechanism analysis shows that:(1)foreign investment will stimulate market competition,promote the effective allocation of resources by eliminating inefficient enterprises;(2)foreign investment will improve the external financing ability of enterprises,ease the capital constraints of host countries,reduce financial friction and improve capital misallocation.There are three innovations in this paper: the first is the innovation of theoretical analysis framework.This paper introduces the resource misallocation in the form of "price wedge" into the analysis framework of traditional factor income share,decomposes the change of labor income share,and explores the influence of resource misallocation on factor income share.The second is the innovation of research mentality and vision.In this paper,the analysis of China's resource misallocation is put in the context of openness,and the instrumental variable method and difference in difference method are used to identify the impact of Internet development and foreign investment on resource misallocation.The third is the renewal of empirical evidence.This paper estimates the efficiency loss of resource misallocation in China's manufacturing industry from the three dimensions of province,industry and ownership.It is found that the development of resource misallocation in China is U-shaped,which provides a comprehensive analysis perspective for understanding the dynamic changes of resource misallocation.In the future,it is important to continue the supply side structural reform and factor marketization reform,adhere to the decisive position of the market in resource allocation,constantly improve the market price system,improve the level of factor liquidity,and improve the efficiency of resource utilization.Secondly,we should accelerate the implementation of the "Internet +" strategy,promote the integration of the Internet and manufacturing industries,and give full play to the positive role of the Internet in optimizing resource allocation.Finally,it is necessary to increase the breadth and depth of opening degree,give full play to the positive role of economic opening to optimize the allocation of resources and correct the resource misallocation,and promote the comprehensive deepening reform in the background of a high level opening up.