Regional Differences In The Impact Of FDI On The Labor Share Of Income In China

With the development of economy, the FDI of China has been a steady rise. However, the labor share of income, which is the workers compensation proportion, presents a downward trend in GDP. The declining of the labor share of income exacerbates inequality of income distribution, hinders the transformation of Chinese economic development mode, and brings unstable to the development of the economy. Intuitive view, the change trend between FDI and labor income share is opposite, whether there was a relation in such a phenomenon, it is worth of our further research.As a large developing country, Chinese different regional economic structure, resource endowment, economic development level and so on, there are significant regional differences. Out of the 18th of the National People’s Congress and the NPC & CPPCC of 2013 worry about the decline of labor income share in China, this paper studies the regional differences in the impact of FDI on the labor share of income, the data of our country is divided into eastern, central and western region.First, this paper respectively inspects and analyzes the regional differences in the impact of FDI on the labor share of income. Through the provincial panel data from 2002 to 2012, according to the eastern region to attract FDI accounted for 84%. the central region accounted for 9%, in the western region accounted for 7%; Labor income share in the distribution of the eastern, central and western region also presents the regional differences, the western region is highest, the eastern region is slightly higher than that of the central region.Secondly, this paper is based on the labor market equilibrium, and sets up the theory model of the impact of FDI on labour income share. Through the analysis of the mathematical model, we find that there is a "U" type of relationship between FDI and labour income share, and this is consistent with the actual data. In addition, because of the difference in the cost of the foreign capital enterprise into different areas, led to the regional differences in the impact of the foreign enterprise on the labor share of income, the influence of FDI on labour income share comes from the interaction effect between technological gap effect and wage competition effect.Thirdly, based on the analysis of the theoretical model, this paper chooses the semi-parametric spatial econometric regression model in the empirical analysis. From the test results of the spatial correlation with panel data, the spatial correlation is significant, so spatial panel model is established, and analyzes the impact of FDI on labour income share. Further, from analysis of theoretical model it is the nonlinear relation between FDI and labor income share, so using the nonparametric method, and the FDI as a parameter variable, introducing spatial econometric model, get a parameter space econometric model to analyze the regional differences in the impact of FDI on the labor share of income. From the empirical results, the introduction of the parameter has improved the precision of the model. The establishment of the model and the estimation method are also important innovation of this article.Finally, according to the result of theoretical model and empirical analysis, we get the conclusions and suggestions. This paper argues that to improve regional labor income share, needs to introduct FDI reasonably according to different regional condition, needs to increase the investment of education, emphasis on human capital investment, develops the technological progress of labor, needs to deepen the reform of state-owned enterprises, and plays its economic main body role.