The Formation Of China’s Skill-biased Technology Progress And Its Impact On Labor Income Share

The labor income share of different labor skills and different income groups and its changes not only affect the distribution of income within workers,but also affect the changes of the total labor income share,which is related to the immediate interests of workers and social equity,and has an important impact on the high-quality development of the national economy.Since the reform and opening up,on the one hand,China’s total labor income share has shown a "U" shape trend,and although it has slowly rebounded since 2007,the overall level is still low;on the other hand,the labor income gap between different groups within different workers has widened.This is obviously not conducive to the expansion of the middle-income group and the realization of common Prosperity,and is not conducive to the upgrading of consumption,which restricts the construction of a new development pattern.With the vigorous development of the new technological revolution,the skill-biased technology has become more and more obvious.Although the overall effect of its employment is still unclear,the impact on the employment of workers with different skills is differentiated,thus,many scholars emphasize the need to be alert to the polarization problems caused by the skill-biased technology,for example,the middle class hollow and employment polarization that have been commonly seen in the developed countries in the West since the1990 s.In turn,skills are an important factor affecting labor income,and the skill-biased technology will inevitably have an important impact on labor income shares through skills.Therefore,this paper studies the formation of skill-biased technology and its mechanism of impact on different labor income shares based on the division of workers’ skill groups,which is important for clarifying the changes of different labor income shares in China and their underlying economic logic.First,this paper establishes a theoretical model including high-,medium-and low-skill elements by means of a double-layer nested CES production function approach to explore the causes of skill-biased technology and its mechanism of action on different labor income shares.Second,the standardized supply-side system approach is used to measure the skill-biased technology index in China,and the comparative approach is used to characterize the factual characteristics of the changes in the employment skill structure and different labor income shares in China since the reform and opening up.Finally,an econometric model is constructed to empirically test and analyze the causes of skill-biased technological progress in China,and its role in relation to different labor income shares.The study shows that: first,the structure of labor skill endowment and trade openness(trade in intermediate goods)are important factors influencing skill bias;under the effect of high-and medium-skill substitution relationship,as the supply of high-skill labor increases,the market scale effect biases technological progress toward high-skill,causing a relative increase in the income share of high-skill labor.With the increasing supply of high-skilled labor,technological progress will eventually favor low-skilled labor under the complementary relationship between the product and service sectors,causing a relative increase in the share of low-skilled labor income,and then a polarization phenomenon will occur.The impact on the share of labor income of different income groups depends on the composition of labor skills of different income groups and the impact of skill-biased technology on the share of labor income of different skills.Second,China’s labor market as a whole is characterized by upgrading;technological progress is skewed toward higher skills and is characterized by three stages of "decline,slow rise,and rapid rise".Third,the skill-biased technology in China has increased the relative employment demand of high-skilled labor and reduced the relative employment demand of middle-and low-skilled labor,resulting in an increase in the relative labor income share of high-skilled labor and a decrease in the relative labor income share of middle-and low-skilled labor;the labor income share of high-income groups has increased and the labor income share of middle-and low-income groups has decreased,i.e.,the labor income gap between different skill groups and different income groups within the labor force has widened.The labor income gap between different skill groups within workers and between different income groups widens;it has a negative impact on the total labor income share.The innovation points of this paper are mainly in three aspects.First,based on the endogenous technological progress model,the theoretical model of Acemoglu(2001),which includes both skills and non-skills,is extended to include high,medium and low skills,while the focus is on factors that highlight the reality of China’s economic and social development based on existing research results.Second,skills are measured using a broad range of occupational categories as an alternative to job tasks.Third,the impact of skill-biased technological progress on labor income shares is examined both within workers(across skill and income groups)and at the aggregate level.Based on the above research,this paper proposes policy measures to promote the rising share of total labor income and optimize the income distribution pattern by encouraging the development of technological progress that increases labor demand such as product innovation and production process reconstruction,accelerating the transformation and upgrading of manufacturing industries and extending the industrial chain,and actively developing the smart economy and fostering new employment patterns.