Labor Income Share Research Articles

The Perception of Policy Uncertainty and the Labor Income Share of Firms: Empirical Research Based on Double Machine Learning

ABSTRACTBased on the double machine learning model, this study examines the impact of perception of policy uncertainty (PPU) on labor income share (LIS). We find that PPU negatively influences LIS. Mechanism test indicates that PPU not only results in a reduction in fixed asset investment, distorting human capital structure, but leads to a financing dilemma for firms, ultimately exerting a detrimental effect on LIS. Additionally, PPU primarily diminishes LIS of ordinary employees rather than executives. Furthermore, the inhibitory effect of PPU on LIS is significantly more pronounced in firms characterized by smaller union scales and those operating within monopolistic industries.

Informality and Female Labor Income Share

This paper presents original evidence to enhance understanding of the nexus between the informal sector and the economic well-being of women. Women encountering substantial obstacles in accessing formal employment opportunities tend to gravitate towards informal sector employment, which is characterized by lower productivity, lower wages, restricted access to credit and training, and an absence of social security coverage. Using two novel datasets of the size of the informal economy and female labor income share of 148 countries for the period 1991-2018, we show that while informality is associated with lower female labor income share in general, the results vary significantly with respect to countries with different income groups and development level. While there is not generally a significant and consistent association in high-income countries, the correlation is significantly negative in low-income countries and positive in middle-income ones.

Selected social impact indicators influenced by materials for green energy technologies

The social risks of green energy transition are underexplored. One of the important questions is which materials used in green energy technologies offer the greatest social benefits, such as ensuring decent living conditions, and which pose the most social risks. To address this issue, we develop a dynamic material-energy flow model integrating system dynamics, social life cycle assessment, and geometallurgical approaches. The analysis focuses on critical materials: Rare Earth Elements, Nickel, Silicon, Graphite, Magnesium, Gallium, Germanium, Indium, Aluminum, Cobalt, Lithium, Zinc, and Tellurium used in wind turbines, electric vehicles, lithium-ion batteries and solar photovoltaic panels. We assess their social impact on work safety, gender equality, informal employment, labor income share, employment rate, and child labor—key issues addressed by Sustainable Development Goals 1, 5, and 8. Here we show that Aluminum production for electric vehicles, wind turbines and solar photovoltaic panels generates the most jobs and income opportunities, while extraction of Cobalt, Lithium, Silicon, and Zinc carry the highest social risks.

Does capital market liberalization increase corporate labor income share? Evidence from China

Labor income share is crucial for maintaining social stability and promoting sustainable economic development, capturing the attention of both academics and policymakers. Existing studies focus on the impact of industry transformation and corporate operation on labor income share. Utilizing a quasi-natural experiment based on the implementation of the Shanghai–Hong Kong and Shenzhen–Hong Kong Stock Connect policies, this study identifies the causal effect of capital market liberalization on corporate labor income share in China. The results show that capital market liberalization enhances labor income share by optimizing human capital, improving corporate governance, and promoting market competition. The findings provide essential implications for advancing income distribution and optimizing the structure of China's capital market.

The impact of green finance on labor income share: Evidence from green finance reform and innovation pilot zone

Enhancing the labor income share (LIS) is essential for optimizing the income distribution structure and achieving the goals of Chinese modernization. Through the panel data of Chinese A-share listed enterprises from 2013 to 2022, we construct a multi-period difference-in-differences model to evaluate the effect of the green finance reform and innovation pilot zones (GFRIPZ) on the enterprises’ LIS and its underlying mechanisms. The research results show that: (1) The GFRIPZ significantly increased the LIS of enterprises. And this conclusion still holds after a series of robustness checks. (2) Mechanism analyses indicates that the GFRIPZ primarily enhances the LIS by alleviating enterprises’ financing constraints and increasing operating income. (3) Heterogeneity analyses reveal that, compared to the eastern China and state-owned enterprises, the income effect of GFRIPZ is stronger in the central-western China and non-state-owned enterprises.

Big data development and labor income share: Evidence from China's national big data comprehensive pilot zones

In the midst of the rapid development of the digital economy, data has emerged as a new core production factor. It not only creates value for producers but also benefits the majority of ordinary workers, playing a crucial role in optimizing income distribution and promoting common prosperity. Utilizing data from Chinese A-share listed companies from 2012 to 2021, this study evaluates the impact of big data development on the labor income share of enterprises, employing the establishment of China's national big data comprehensive pilot zones as a quasi-natural experiment. Additionally, it examines the heterogeneity of this impact across regional, industry, and firm levels. The findings reveal that big data development significantly increases the labor income share of firms, mainly through mitigating labor mismatch, improving innovation capability, and upgrading human capital. Heterogeneity analysis shows that big data development exerts a stronger effect on eastern and labor-rich regions, high-tech and non-labor-intensive industries, big-data industries and low-competition industries, as well as state-owned and mature enterprises. This study provides policy insights on fully harnessing the benefits of big data pilot policy to increase labor income share, with important implications for developing countries.

Broadband infrastructure expansion and labour income share: micro-evidence from Chinese industrial enterprises

ABSTRACT This study investigates the impact of broadband infrastructure on the labour share. We exploit the implementation of the ‘Broadband China Strategy’ (BCS) as an exogenous policy shock and use the staggered difference-in-differences framework with a panel dataset of Chinese industrial enterprises spanning 2011–2015. We find that the BCS leads to a significant reduction in the labour income share of firms in pilot cities compared with those in non-pilot cities, which remains robust after conducting various robustness checks. Rising market power and deepening capital are the two mechanisms underlying this effect. While our further analysis underscores significantly positive impact of broadband infrastructure on firm productivity and skilled labour structure, they do not highlight an elevated skill premium tied to broadband infrastructure. Heterogeneity analysis reveals that the effects are more pronounced among larger firms, industries with higher concentrations, and cities with higher innovation capacities. Overall, this study augments the existing literature on the firm-level determinants of labour share, providing a micro-level assessment of the labour market implications of broadband infrastructure.

Party organization embedding and enterprise labor income share

This study investigates how party organization embedding affects the share of labor income in enterprises. It looks at party organization embedding from two perspectives: structural embedding and relational embedding. The study finds that party organization embedding boosts the share of labor income, with enterprise greening transformation and financing constraints playing a mediating role. The study's conclusions remain valid even after robustness and endogeneity tests. Additionally, there are differences in the impact of party organization embedding on labor income share across enterprises in different regions. The effect of party organization embedding on labor income share is more significant in the western region, and party organization embedding has a more pronounced impact on labor income share in less market-oriented environments.

Impacts of digital-technology adoption on workers: A simple model and evidence from China

This paper examines the impact of point-of-sale (POS) adoption on training to investigate firms' requirements of employees. We construct a two-sector general model and find that the adoption of technology drives firms to increase training activities and decrease their labor-income share. Based on the data of 2451 firms from China's Small and Micro-sized Enterprises Survey in 2015 with an instrumental variable approach, we document that a one year increase in POS use increases the likelihood of firm training by 18.5–32.6%. In addition, the added training results from the demand for professional competence rather than simple needs for operating the POS system. Correspondingly, POS service intensifies the polarization of internal wages and worsens workers' welfare. The plausible underlying mechanisms for this are technology use, financial constraints, and operational efficiency.

The impact of financial technology on employment: Protection or disruption?

This study examines the impact and underlying mechanisms of financial technology (FinTech) on corporate labor demand by utilizing microdata from Chinese listed companies between 2011 and 2019. The results indicate that FinTech significantly enhances firms' overall labor demand and demand for skilled labor. Mechanistic analysis reveals that FinTech alleviates firms' financing constraints, increasing research and development (R&D) investments, which subsequently stimulates labor demand. Heterogeneity tests have revealed that the impact of FinTech on firms' labor demand varies depending on their stage of growth, ownership attributes, and level of financial development in the regions in which they are located. Furthermore, we reveal that FinTech can concurrently increase labor demand for workers with varying skill levels and educational backgrounds and increase the share of labor income. We provide new insights with theoretical and practical implications for studying the intrinsic linkages between financial and labor markets.

Does banking competition increase corporate labor income share? Evidence from China

This paper investigates the impact of banking competition on corporate labor income share in China. Utilizing hand-collected unique data on bank branches within a certain distance of firms and a large sample of Chinese A-share list firms spanning the period 2000–2022, we find that banking competition significantly boosts corporate labor income share. A 10 percent increase in banking competition, the corporate labor income share increases by 0.06 percent on average. The results remain robust after replacing proxies, changing estimation methods, controlling for other shocks, and addressing endogenous concerns. Easing financing constraints, improving investment efficiency, and enhancing human capital are three essential channels through which banking competition promotes corporate labor income share. We also find that the impact of banking competition on corporate labor income share is more pronounced for firms with higher external financing dependence, higher financing gaps, more investment opportunities, higher governance efficiency, and higher information asymmetry. Our findings highlight the significance of enhancing banking competition to promote income distribution, foster common prosperity, and drive high-quality economic development.

How industrial robots affect labor income share in task model: Evidence from Chinese A-share listed companies

This paper analyses the impact of the use of industrial robots on labor income shares at both the theoretical and empirical levels. On the theoretical side, the role of induced technological progress, the creation of new tasks, and the penetration of industrial robots on labor income shares are systematically explored by incorporating industrial robots into task models and endogenizing the task induced technological progress. Empirically, industrial robot penetration at the regional level in China is constructed from the industrial robots data released by the International Federation of Robotics (IFR), which is matched with Chinese A-share listed companies in 2011–2019, and the causal strategy of Bartik-style instrumental variables is used to analyze the impact of the penetration of industrial robots and task induced technological progress on the share of labor income. The study shows that the penetration of industrial robots significantly increases the share of labor income, but the task induced technological progress reduces the share of labor income, and that the impact of the penetration of industrial robots varies significantly external financing dependence, ownership, and regions. From the perspective of the impact mechanism, robot penetration increase the levels of inputs complementarity and hence reduce the elasticity of substitution between robots and labor. Meanwhile, robots can effectively increase the wage level of the labor force, thus increasing the labor income share. The findings of this paper provide a decision-making reference for how industrial robots can better serve human beings in the new era so that workers can share the fruits of economic development.

Environmental regulation, endowment characteristics and income inequality: A general equilibrium analysis

Environmental regulations such as the “dual carbon” target directly act on the restriction of the total amount of dirty capital to reduce carbon emissions. The change in factor endowment will have a range of effects on production and income distribution. To examine the effects of environmental regulations restricting dirty capital endowment on income distribution, this paper presents a general equilibrium model with two sectors and three factors. The unregulated clean capital-intensive sector is imperfectly competitive and features firm dynamics, using labor and clean capital as factors of production, while the regulated dirty capital-intensive sector is perfectly competitive using labor and dirty capital. We show that a decrease in the dirty capital endowment will reduce the output of the dirty capital-intensive sector and expand the clean capital-intensive sector in the long run, making society transition to green production. The tighter the restriction on the use of the dirty capital endowment is, the more firms will enter the clean capital-intensive sector, while the business-stealing effect will reduce the output of individual clean firms. We further show that the rents of both dirty and clean capital will rise while the wage of labor will fall due to the regulation. Changes in factor prices do not necessarily lead to inequality in income distributions. When the factor substitution effect in the regulated sector is large enough, clean production regulation will increase the share of labor income and decrease the share of capital income.

Competition policy and labor income share: Evidence from the antitrust policy in China

This study examines the impact of increased market competition on labor income share. We use the enactment of China's Anti-Monopoly Law as a quasi-natural experiment. The results reveal that the Anti-Monopoly Law has a significant positive effect on the labor income share of firms with higher market power. This is because the rising market competition, effected by the Anti-Monopoly Law, inhibits market power and increases average labor wages. Our findings are relevant for firms in provinces with higher administrative monopolies, with less competition, and under industries with less competition.

Globalisation and the efficiency-equity trade-off

We revisit the effects of globalisation over the past 50 years in a large sample of advanced and emerging countries. We use accessions to Globalisation Clubs (WTO, OECD, EU), financial liberalisation and an instrument for trade openness to study the trade-off between efficiency (proxied by real GDP per capita and TFP) and equity (proxied by the labour share of income and the Gini index of inequality). We find that (i) most of our episodes lead to an increase in trade openness (ii) the effects on GDP per capita are mostly positive with some interesting exceptions and (iii) there is little evidence that globalisation shocks lead to more inequality.

Social security fee reduction, industrial robots, and labor income share

This study explores whether the policy of reducing labor payments can have opposite effects to those expected. Specifically, it investigates whether reducing the social insurance contribution rate can increase labor employment and enhance overall labor income. This study focuses on a direct social security fee reduction event in China. This event targets labor-intensive enterprises and encourages adopting industrial robots. By leveraging this quasi-natural experiment, we construct a mathematical model. Further, using a triple-difference strategy, we examine the impact of social security fee reduction on firm factor structures and income distribution. This study observes that a social security fee reduction decreases the labor income share of enterprises. However, this only applies to non-small and medium-sized enterprises (non-SMEs) and is not observed in SMEs. Consequently, because of the social security fee reduction, automation is the primary cause of the decline in the labor income share. The reduction in social security fees enables companies to use the saved funds for further automation, causing labor productivity to exceed labor costs and ultimately reducing the labor income share. The findings suggest that industrial specialization is one of the reasons for labor income share decline in transitioning economies.

Business environment optimization and labor income share of enterprises: Evidence from China

The external business environment in which enterprises operate is often subject to constant change. This paper explores how the business environment affects firms’ labor income share. Utilizing a micro-level dataset of China’s A-share listed companies from 2010 to 2020, we find that an optimal business environment enhances the labor income share. Mechanism tests reveal that a better business environment contributes to the increase in labor income share by fostering human capital upgrading and improving labor dispute resolution. Further analysis demonstrates that the positive effect is more pronounced for firms with lower labor intensity and non-state ownership, and also for firms with coastal locations and higher institutional investor shareholdings. These findings contribute to existing literature on factors influencing labor income share and also provide valuable policy implications for promoting the development of a better business environment.

Impact of labour income in gross value added on migrations in Bosnia and Herzegovina

The transition countries of Southeast Europe, especially the countries of theWestern Balkans, have achieved modest economic growth rates since the beginningof the transition process. High unemployment rates, relatively high externalimbalances, and rising external debt are common for the entire region. This paperwill explain the impact of a decrease in the share of labour income in total grossvalue added on the increased outflow of the working-age population. The subjectof a specific analysis is the increase in inequality and the consequences ofdifferences in income on the economy and society of the country will be explainedIncreasing inequality in Bosnia and Herzegovina is measured by a significantdecrease in the share of labour income in total gross value added in Bosnia andHerzegovina affects the outflow of the working-age population abroad.

Cities’ labor administrative penalties and labor income share of enterprises

The labor administrative penalties of a city are enforced by the city's labor security administrative department for any breaches of labor security laws, regulations, or norms. The severity of labor administrative penalties differs across cities; thus, this study aims to determine how a city's penalties affect the labor income share of enterprises. We conduct a practical investigation to examine the influence of labor administrative penalties imposed by cities on the internal income distribution structure of firms. This study utilizes theoretical analysis and data on labor administrative penalties in Chinese cities, as well as samples of A-share listed businesses in Shanghai and Shenzhen. From the perspective of the internal income distribution structure, we examine the labor income share of firms and discover that labor administrative penalties in cities significantly raise the labor income share of these enterprises. The share of labor income of enterprises registered in the city increases by 0.9707 % for each additional unit of cities' labor administrative penalties (i.e., for a one-time labor administrative penalty per 10,000 people). The conclusion remains valid even after excluding the endogeneity and robustness tests. Regional labor administrative penalties can enhance the internal management of enterprise quality by promoting transparency and deterring non-compliance. This, in turn, mitigates credit risk for enterprises by fostering stable labor relations. Enhancing the quality of internal control and mitigating credit risk can lead to an increase in the labor income share of firms. An analysis of heterogeneity shows that the impact of labor administrative penalties in cities on increasing the percentage of labor income varies. The impact is more pronounced for state-owned firms and enterprises with low levels of investment.

Service opening and wages of manufacturing firms: Evidence from China

Based on the ‘Catalogue for the Guidance of Foreign Investment’ and the input-output table issued by the National Bureau of Statistics, this paper constructs the service opening index from 1998 to 2013. With this indicator, we empirically study the impact of the service industry opening-up on firm wage. Our research yields a few findings. First, the service industry opening-up can significantly improve the level of firm wage. This result is still significantly valid after various robustness test and endogenous treatment. Moreover, after segmenting upstream service sources into details, the opening-up of the finance, telecommunication, and sales service sectors can promote the growth of firm wage. Second, the heterogeneity analysis shows that the service industry opening-up exerts a greater impact on firms' wage for firms in the central and western regions rather than eastern region, and for firms in the “post rich” regions rather than “pre-rich” regions, as well as firms in more severe market segmentation rather than regions with less market segmentation. Finally, according to the analysis of the impact mechanism, the opening-up of the service industry mainly promote firm wage through three channels: improving labor productivity, operating income, and human capital. Furthermore, the analysis of technical differences in service input displays that the service industry opening-up exerts a greater impact on firms' wage for firms in high-tech service industry. The analysis of labor income distribution shows that the opening-up of the service industry can also significantly increase the share of labor income of firm, especially in the opening-up of finance, telecommunication, and sales service industry.