Impact of Development Zone Construction on Labor Share in China

Ziyu Liu,Yanlin Yang

doi:10.3390/su12093642

Abstract

The decline in the share of labor income is associated with rising income inequality, which raises a series of economic and social problems. These problems seriously threaten the sustainability of economic development. To maintain sustainable economic development, China’s government has invested hundreds of billions of dollars to build economic development zones by attracting high-tech enterprises into the zones. In our paper, we aim to analyze whether the construction of economic development zones can effectively increase the share of labor income. We use PSM-DID (Propensity Score Matching Difference-in-Difference) to evaluate the impact of establishing economic development zones in China on the labor income share of enterprises in economic development zones in 2006. We found that the establishment and construction of economic development zones increased the share of labor income through the “agglomeration effect” and “policy effect”. Estimation of the level of heterogeneity among economic development zones shows that, compared with provincial economic development zones, the construction of national economic development zones has a greater effect on increasing the labor income share of enterprises in those zones. Economic development zones in the eastern, central, and western regions should also increase their share of labor income areas.

Highlights

Income inequality leads to a decline in demand, weakens long-term economic growth capacity, and widens the gap between the rich and the poor, resulting in social instability and unsustainable development [1]
During the income distribution process, the primary distribution is basic distribution, while redistribution is completed on the basis of primary distribution
Based on the typical fact that a large number of national and provincial economic development zones were newly established in 2006, this paper systematically evaluated the micro effects of the establishment of economic development zones on the enterprises

Summary

Introduction

Income inequality leads to a decline in demand, weakens long-term economic growth capacity, and widens the gap between the rich and the poor, resulting in social instability and unsustainable development [1]. At the end of that decade, China’s income inequality was almost identical with the most equal income distribution among the Nordic countries, but has subsequently developed to a level close to that of the United States [2]. Increasing the labor income share in primary distribution could effectively improve China’s income inequality and ensure sustainable development. Studying the above issues gives us a deeper understanding of the economic impact of the establishment and construction of development zones in economic operations and helps us explore how to alleviate the downward trend of labor income shares. These are the research goals of our paper

Objectives

Results

Conclusion