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How population aging and digital transformation reshape labor income share? Mechanisms of firm-level substitution and urban job expansion

Author

Listed:
  • Guo, Qing
  • Zeng, Xiangquan
  • Yuan, Lulu

Abstract

The impact of population aging and digital transformation on the labor income share remains insufficiently understood. Prior research typically examines these forces separately, leaving uncertain how their interaction shapes factor income distribution. This study jointly investigates the effects of aging and digitalization using firm- and city-level data from China (2010–2020) combined with monthly recruitment-platform data to identify the causal impact of demographic shifts and technological change. At the firm level, population aging amplifies the labor-substituting effect of digital adoption, raising capital intensity while reducing labor income share. At the city level, aging strengthens the job-creating effects of digitalization, expanding platform jobs and self-employment that increase labor income share. By revealing these opposing mechanisms—capital substitution versus platform job creation—our findings advance understanding of how demographic and technological forces interact and suggest policies that promote retraining, inclusive digitalization, and flexible labor reforms.

Suggested Citation

  • Guo, Qing & Zeng, Xiangquan & Yuan, Lulu, 2026. "How population aging and digital transformation reshape labor income share? Mechanisms of firm-level substitution and urban job expansion," Economic Modelling, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:ecmode:v:158:y:2026:i:c:s0264999326000465
    DOI: 10.1016/j.econmod.2026.107517
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