Changes in labor share of China: A micro-level anatomy

Abstract

Using comprehensive firm-level databases, we study the micro-basis of different trends in aggregate and individual labor shares in China's manufacturing sector during 1998–2016. We find that (1) redistributing value added towards the bottom of labor share distribution causes the decline of aggregate labor share; (2) the redistribution effect is driven by firms gradually increasing market share and reducing labor share; and (3) state-owned enterprises contribute significantly to the changes in aggregate labor share. The analysis of this paper enhances the understanding of the changes in China's labor share from the perspective of dynamic change of micro-firms.