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Factor Misallocation, Industrial Structure And Labor Income Share In China

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  • MINGHUI XIN

    (Shanghai Gold Exchange, Shanghai 200001, P. R. China†School of Management, Fudan University, Shanghai 200433, P. R. China§International Business School, Shaanxi Normal University, Xi’an, Shaanxi 710119, P. R. China)

  • MIN GONG

    (��Centre for Macroeconomic Research, Xiamen University, Xiamen, Fujian 361005, P. R. China)

  • PAN XIE

    (�International Business School, Shaanxi Normal University, Xi’an, Shaanxi 710119, P. R. China)

Abstract

By presenting a two-sector DGE model, this paper investigates the relative misallocation coefficients for capital and labor within three industries in China from 1993 to 2018, then discusses the effect of factor misallocation and factor substitution elasticity on the labor income share. The following three conclusions were reached. (1) The overall labor income share reduced due to the industrialization before 2007, but after 2007 it increased by promoting the proportion of services. (2) Compared with the situation without barriers, the cross-industry factor misallocation reduced the proportion of labor in manufacturing by 44% during industrialization and in services by 5.05% during de-industrialization, respectively. (3) Eliminating the factor misallocation could raise the labor income share by 4.6% in industrialization, but it shows a weak effect during de-industrialization.

Suggested Citation

  • Minghui Xin & Min Gong & Pan Xie, 2023. "Factor Misallocation, Industrial Structure And Labor Income Share In China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(06), pages 1967-1990, December.
    • Handle: RePEc:wsi:serxxx:v:68:y:2023:i:06:n:s0217590820500290
    DOI: 10.1142/S0217590820500290
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    More about this item

    Keywords

    Industrial structure; labor income share; factor substitution elasticity; factor misallocation;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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