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Dialect diversity and labor income share in China

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  • Si, Xu
  • Liu, Yulin
  • Wang, Jun

Abstract

Language, as a prominent cultural characteristic of a region, has a lasting and extensive impact on economic performance. In this paper, we study the impact of dialect diversity on the labor income share in China. We find that regional dialect diversity depresses the labor income share in manufacturing firms in China. This effect holds up to robustness and endogeneity checks. We explore the transmission channels underlying this negative relationship and find that dialect diversity depresses the labor income share by decreasing worker bargaining power, and this channel can be further explained by the depressing effect of dialect diversity on the participation of firms in export trade and regional human capital accumulation. Heterogeneity analysis shows that the negative effect of dialect diversity on the labor share is weak or insignificant in sectors with strong worker bargaining power such as state-owned enterprises, labor-intensive enterprises, and high-skill-intensive enterprises.

Suggested Citation

  • Si, Xu & Liu, Yulin & Wang, Jun, 2023. "Dialect diversity and labor income share in China," Economic Systems, Elsevier, vol. 47(4).
    • Handle: RePEc:eee:ecosys:v:47:y:2023:i:4:s0939362523000845
    DOI: 10.1016/j.ecosys.2023.101145
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    References listed on IDEAS

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