Study On The Impact Of Credit Constraints On Labor Share In China

Since the reform and opening up,China has made remarkable achievements in the economic development but it is faced with a series of problems.During these problems,the income gap is directly exposed to us,which has blocked economic development and social stability.The unbalance of factor income distribution show in front of our eyes through the continuous decline of labor share.Basing on the fact that labor share has been continuously declining since the mid-90s,the paper proposed that financing constraints has an affect on the share of labor income,and constructed a theoretical model to explain the theoretical mechanism that how credit financing constraints effect labor share.Finally,basing on the China investment environment survey of Chinese enterprises in 2012 by the World Bank,the paper empirically analyzed the relationship between financing constraints and labor share.The results show that financing constraint significantly reduce their labor's share.The conclusion remains true for the enterprises that fail to secure loans from financial institutions.Financing constraint of non-foreign-owned enterprises and non-state-owned enterprises significantly reduce the labor share.But the impacts are not significant in the foreign-owned enterprises and the state-owned enterprises.Private enterprises are facing the most serious financing constraints.What's more,the negative impact of financing constraints on their labor share is also the most serious.Financing constraint of smaller enterprises and the enterprises in traditional manufacturing sectors significantly reduce their labor share.The impacts are not significant in the larger enterprises and the enterprises in the enterprises in emerging manufacturing sectors.