Area Characteristics Of The Chinese Industrial Capital-labor Substitution

Since the21st century, Chinese industry has a rapid development, and the industry has alreadybecome the major force and powerful engine which China’s economic development relies on. Inrecent years, wage levels are generally rising across the country, so that labor costs rising andlabor supply declining have become the inevitable trends. Overall, due to the continuing rising oflabor costs, companies will inevitably choose to increase capital-invested and reduce the demandfor labor, in order to reduce costs and increase profits. Therefore, Chinese industrial capital isimperative to replace labor, which is the inevitable trend of Chinese industrial economicdevelopment. It is noteworthy that, because of the constraints of Chinese special geographicalenvironment, Chinese economic development has significant regional differences accompanied bya large-scale inter-regional labor mobility. In the long range, labor mobility would both reducedifferences of economic development among regions, and weak the capital-labor substitutiondifferences. Therefore, in the study of the capital-labor substitution in China’s industrialdevelopment process, industrial labor mobility is also the issue worth exploring, which is of greatsignificance for the further study on the region differences and the main factors of industrialcapital-labor substitution, under the inter-provincial labor mobility premise. Moreover, it couldprovide a reference for the formulation of macroeconomic policies and the sustainabledevelopment of the industry.First, this paper gives the theoretical and practical analysis of Chinese industrial capital-laborsubstitution. And then it focuses on the industrial labor mobility. Because this paper attempts toexplore the relative mobility of the industrial labor, so when designs the metrics measure of labormobility, it selects the average annual growth in value of the proportion between the provinciallabor force and population as a measure indicator of relative labor mobility. Then this paperanalyses the industrial labor force mobility, gives regional division based on labor mobility, withthe comparative analysis of tertiary industry, and acquires the following conclusions that industriallabor mobility and the total population mobility don’t consistent with each other, but regionaldifferences of industrial labor mobility is basically the same with that of capital-labor substitution.On the other side, except for a few cities like Beijing and Shanghai, the number of employees inthe tertiary industry is still less than the second industry in most parts of the country. From thenational aggregate level, the secondary industry is still the major source to absorb labor. However,the tertiary industry is developing rapidly, and it has shown a strong momentum to become themajor source to absorb labor beyond the second major industry.Under the ground of labor mobility, according to the regional division based on the industry labormobility, this paper uses the panel data whose years are from2000to2011and regions areincluding31provinces nationwide, constructs two return equations which study the factors how to influence the industry labor force and the industry capital-labor substitution, so that it couldfurther explore the regional characteristics and differences of the main factors and their affects tothe capital-labor substitution in Chinese industrial development progress. From the overallnational perspective, industrial output will promote the increase of labor force, and weakcapital-labor substitution. Wage is the most important affecting factor, and its rise will lead to thedecrease of the industrial labor force, and the increase of the capital-labor substitution. Theindustrial structure has the smallest affect to the capital-labor substitution among the three mainfactors, and it will promote the substitution of capital to labor. In the meanwhile, from thesub-regional level, in the industrial labor inflow area, the empirical results of industrial output andwage levels is consistent with the empirical results of the overall level of the country, butindustrial structure in this region has less significant impact on the industrial capital-labor. In theindustrial labor outflow area, the empirical results of wage levels and industrial structure isconsistent with the empirical results of the overall level of the country, but industrial output in thisregion has less significant impact on the industrial capital-labor. In the industrial labor stabilityarea, only the regional wage level has a significant impact on the capital-labor substitution, theother two are not significant. Therefore, the industrial capital-labor substitution is widelyoccurring across the country, and just the degrees of industrial capital-labor substitution in eachregion are different, as well as the impacts of the main factors in each region.