In the context of the labor market segmentation in China and its reaching the Lewis turning point, this paper interprets the changing trend of the labor share of income in China from the changing perspective of the employment ownership structure. The theoretical analysis reveals that the labor share of income follows a U-shaped curve when the agricultural labor force gradually moves into the private and self-employed sectors. Using the Chinese provincial-level panel dataset between 1990 and 2016, our empirical study finds that there is a critical threshold. When the share of agricultural labor force is above this threshold value, the impact of the increase in the employment share of the urban private sector on the labor share of income is negative. In contrast, the impact becomes positive when the share of the agricultural labor force is less than or equal to this threshold value. Moreover, the impacts of other variables of employment ownership structure don’t show this kind of feature on both sides of this threshold value. The increase in the employment share of the urban private sector accounted for about 29.37% of the growing labor share of income between 2007 and 2016. This paper provides policy implications in the following four areas: institutional guarantee improvement, harmonious labor relations establishment, redistribution policy imposition and economic development pattern transformation.
Keywords: labor share of income, employment ownership structure, Lewis turning point, urban private sector employment
China Finance and Economic Review
Volume 9 Number 1 Spring 2020.P43