Research On The Influencing Factors And Effect Mechanism Of Chinese Labor Share

Since the reform and opening up, China’s economy has sustained rapid growth withthe GDP average annual growth rate up to9.7%, which is called the miracle of China.Despite the sustained rapid economic growth, China’s labor share does not improve atall, which has aroused great concern in government and academia.Based on this background, the paper studies the current situation of the Chineselabor share since the reform and opening up, and makes comparison between China andAmerica concerning to the labor share. We draw that the Chinese labor share isrelatively low,and changes periodically，showing a downward trend in recent years.Then, the paper systematically discusses the various factors that can affect the laborshare change, and the ways how they influence the labor share change in view of thetheoretical analysis. According to the theoretical analysis, we establish the econometricmodel to carry on the empirical research, and we also conduct a rigorous robust analysisto ensure the reliability of the econometric results. We draw the following conclusions:The institution environment has both advantage and disadvantage respects on the laborshare, and in general it contributes to improve the labor share transforming fromPlanned Economy to Market Economy. The Chinese labor share shows the〝U〞curvelaw with economic development, while it is lowing in the left side of the〝U〞curve.Due to industrial structure adjustment, it will promote the improvement of the laborshare as the first industry transforms to the third industry, while it will lead todeteriorate as the first industry transforms to the second industry. Under the condition ofthe capital biased technology progress, capital is deepening, which will cause a bias tocapital during allocation. As the Chinese labor market supply exceeds demand, salarydoes not increase as the prevailing international trade absorbs more and more workers，so the prevailing international trade does not improve the labor share. Finally，we putforward corresponding suggestions according to the conclusions.In a word, the paper systematically studies the influencing factors and effectmechanism of the Chinese labor share, and it provides a good theoretical basis for thegovernment to implement the policy about improving labor share.