Empirical Research On The Impact Of Resource Misallocation And Trade Liberalization On Labor Income Share

In recent years,income distribution and resource allocation are the macroeconomic issues to which scholars and governments attach great importance.With the advance of trade liberalization,Chinese labor income share has declined year by year since the 1990s.Labor income share is an indicator of the initial distribution of national income that reflects the proportion of labor remuneration in national income.The decline of China's labor income share is not only to expand the social gap between rich and poor,but also reduce the consumption needs,which is unhelpful to China's economic sustainable development.Meanwhile,due to Chinese progressive marketization reform,the China's resource market is of a low degree of marketization by the government intervention,thus capital and labor can not achieve the optimal allocation leading to resource misallocation.This paper analyzes trade liberalization and resource misallocation on the impact of labor income share theoretically and empirically in order to provide the new ideas for perfecting income distribution and promoting sustainable economic development.Using Chinese manufacturing enterprise data from 1998-2007,this paper estimates the labor misallocation,capital misallocation and overall resource misallocation within industries on Goguang and Huguanliang(2013)model.The study finds that the labor misallocation fluctuates greatly,however,the capital misallocation and the overall resource misallocation show an upward trend as a whole.The theoretical mechanism is further discussed of trade liberalization and labor income share,resource misallocation and labor income share,and the interaction between trade liberalization and resource misallocation on the labor income share.With the relevant theoretical hypothesis put forward,the measurement model is constructed.The system GMM method is used for empirical analysis.Conclusions of the study show as follows.First,the overall resource misallocation and labor misallocation have a significant negative impact on labor income share,while the capital misallocation increases labor income share significantly.Second,the reduction of tariffs has increased labor income share.Third,overall resource misallocation and labor misallocation weakens the positive effects of trade liberalization on the labor income share,while capital misallocation strengthen the positive effects of trade liberalization on the labor income share.Forth,as the four control variables,government subsidies and technological progress reduce the labor income share,while the proportion of state-owned shares and FDI increase the share of labor income.Finally,relevant policy recommendations are proposed according to the theoretical and empirical research.