The factor income distribution in China: 1978-2007
This paper investigates changes in aggregate labor share in China during 1978 and 2007 with a particular focus on the 1995-2007 period during which official statistics report a drop of 12.45 percentage points in labor's share of national income (labor share). Our main findings are: (1) The reported fall in aggregate labor share is overstated. According to the official statistics released by the NBS (2007a), the labor share fell 5.25 percentage points from 2003 to 2004. However this dramatic decline, 42.16% of the total reported decline of the labor share from 1995 to 2007, is completely due to the changes in the way NBS break down the operating surplus state-owned and collective-owned farms and the mixed income of the owners of individual economy; (2) For the last three decades, two main forces have been driving shifts in the aggregate labor share: (i) structural transformation between the agriculture and non-agriculture sectors and (ii) shifts in the labor share within the industry sector; (3) From 1995 to 2003, these two effects are both negative and together drive down aggregate labor share by 5.48 percentage points. The structural change explains 61.31% of the decline and the remaining 38.69% of the decline is due to the changes in the labor share within sectors, primarily in the industry sector; (4) Labor share in agriculture is lower than labor share in services. Therefore, when the service sector grows relative to the agriculture sector in the economy, the aggregate labor share of income declines; and (5) Restructuring of the SOEs and expanded monopoly power are the main reasons for the decline of labor share within industry after 1998. Relative price shifts, the factor input ratio, and biased technological progress are all insignificant forces for this decline because the substitution between factors in the industry sector is nearly unit elastic.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bentollia, S. & Saint-Paul, G., 1999.
"Explaining Movements in the Labor Share,"
9905, Centro de Estudios Monetarios Y Financieros-.
- Samuel Bentolila & Gilles Saint Paul, 1999. "Explaining movements in the labor share," Economics Working Papers 374, Department of Economics and Business, Universitat Pompeu Fabra.
- Bentolila, Samuel & Saint-Paul, Gilles, 1998. "Explaining Movements in the Labour Share," CEPR Discussion Papers 1958, C.E.P.R. Discussion Papers.
- Wang, Yan & Yao, Yudong, 2003. "Sources of China's economic growth 1952-1999: incorporating human capital accumulation," China Economic Review, Elsevier, vol. 14(1), pages 32-52.
- Loren Brandt & Xiaodong Zhu, 2000. "Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 422-451, April.
- Douglas Gollin, 2001.
"Getting Income Shares Right,"
Department of Economics Working Papers
2001-11, Department of Economics, Williams College.
- Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001.
"Aggregate Productivity Growth: Lessons from Microeconomic Evidence,"
in: New Developments in Productivity Analysis, pages 303-372
National Bureau of Economic Research, Inc.
- Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
- John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau.
- Alan B. Krueger, 1999.
"Measuring Labor's Share,"
American Economic Review,
American Economic Association, vol. 89(2), pages 45-51, May.
- Nicola GIAMMARIOLI & Julian MESSINA & Thomas STEINBERGER & Chiara STROZZI, 2002. "European Labor Share Dynamics: An Institutional Perspective," Economics Working Papers ECO2002/13, European University Institute.
- Gary Hansen, 2010.
"Indivisible Labor and the Business Cycle,"
Levine's Working Paper Archive
233, David K. Levine.
- Olivier Blanchard & Francesco Giavazzi, .
"Macroeconomic effects of regulation and deregulation in goods and labor markets,"
187, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
- Olivier Blanchard & Francesco Giavazzi, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," NBER Working Papers 8120, National Bureau of Economic Research, Inc.
- Blanchard, Olivier J & Giavazzi, Francesco, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labour Markets," CEPR Discussion Papers 2713, C.E.P.R. Discussion Papers.
- Bai, Chong-en & Li, David D. & Wang, Yijiang, 1997. "Enterprise Productivity and Efficiency: When Is Up Really Down?," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 265-280, June.
- Holz, Carsten A., 2004. "Deconstructing China's GDP statistics," China Economic Review, Elsevier, vol. 15(2), pages 164-202.
- Wu, Harry X., 2001. "China's comparative labour productivity performance in manufacturing, 1952-1997: Catching up or falling behind?," China Economic Review, Elsevier, vol. 12(2-3), pages 162-189.
- Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
- Solow, Robert M., 2000. "Growth Theory: An Exposition," OUP Catalogue, Oxford University Press, edition 2, number 9780195109030, December.
- Anthony B. Atkinson, 2000. "The Changing Distribution of Income: Evidence and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(1), pages 3-18, 02.
- D. Gale Johnson, 1948. "Allocation of Agricultural Income," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(4), pages 724-749.
- Kydland, Finn E & Prescott, Edward C, 1982.
"Time to Build and Aggregate Fluctuations,"
Econometric Society, vol. 50(6), pages 1345-70, November.
- Finn E. Kydland & Edward C. Prescott, 1982. "Executable program for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4, Quantitative Macroeconomics & Real Business Cycles.
- Finn E. Kydland & Edward C. Prescott, 1982. "Web interface for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4a, Quantitative Macroeconomics & Real Business Cycles.
- Chong-En Bai & Yingjuan Du & Zhigang Tao & Sarah Y. Tong, 2003.
"Local Protectionism and Regional Specialization: Evidence from China’s Industries,"
William Davidson Institute Working Papers Series
2003-565, William Davidson Institute at the University of Michigan.
- Bai, Chong-En & Du, Yingjuan & Tao, Zhigang & Tong, Sarah Y., 2004. "Local protectionism and regional specialization: evidence from China's industries," Journal of International Economics, Elsevier, vol. 63(2), pages 397-417, July.
- Bai, Chong-En & Lu, Jiangyong & Tao, Zhigang, 2009.
"How does privatization work in China?,"
Journal of Comparative Economics,
Elsevier, vol. 37(3), pages 453-470, September.
- Rawski, Thomas G., 2001. "What is happening to China's GDP statistics?," China Economic Review, Elsevier, vol. 12(4), pages 347-354.
When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:21:y:2010:i:4:p:650-670. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.