Labor’s Share of Income: Another Key to Understand China’s Income Inequality

233 Pages·2016·3.41 MB·English

by  Minghai Zhou (auth.)

Minghai Zhou
Labor’s
Share of
Income
Another Key to Understand China’s
Income Inequality
’
Labor s Share of Income
Minghai Zhou
’
Labor s Share of Income
’
Another Key to Understand China s Income
Inequality
123
Minghai Zhou
Schoolof Economics
University of Nottingham Ningbo China
Ningbo,Zhejiang
China
ISBN978-981-10-0172-7 ISBN978-981-10-0173-4 (eBook)
DOI 10.1007/978-981-10-0173-4
LibraryofCongressControlNumber:2015955889
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Preface
China’s high economic growth after reform and opening up has been claimed as a
miracle in human history by many economists. After the culture revolution, China
sufferedfromseriouspovertyandbackwardnessduetowhichthenationaleconomy
was on the edge of collapse. Today, China is the second largest economy in the
world with per capita GDP reaching $8000 and ranks among the middle-income
countries. Since reform and opening up, 0.5 trillion people have got rid of poverty
andthelivingconditionandlifestyle ofordinaryChinese peoplehaveexperienced
dramatic changes. As one of the many witnesses who experienced the whole
processofChina’sreform, allkindsofpastmemoriesandpresentthoughtsmingle
together, making me feel lucky to be living at the right time.
However, China’s recent history of high growth is not an idyllic picture of
beauty but a striving picture of magnificence. Different times have different con-
tradictions and conflicts. Great success comes with various pains and costs. As
economists,theimportantthingisnottosingpraisefortheobtainedsuccessbutto
confront the real problems with calm and deep academic analysis in order to seek
solutionsandprovidereferencestopolicymakersatvariouslevels.Thisbookabout
China’s labor’s share of income by Dr. Minghai Zhou is such a research outcome
that has very focused and realistic meanings.
The decrease of the labor and household share of income is a phenomenon that
has attracted wide attention in China. It is one of the stylized facts for being
criticized as the evidence for unreasonable income distribution. The Chinese gov-
ernment has paid a lot of attention to this issue. In recent decades, almost all
five-year plans and annual government working reports emphasize the importance
of improving the income distribution by increasing these two shares. Although the
government has taken some measures to deal with this issue, the situation has not
been improved fundamentally. In the composition of household income of urban
andruralcitizens,theshareoflaborcompensationtakesmorethan60%.Inorderto
increase the household share of income continuously, we need to make sure the
v
vi Preface
steadyincreaseofthelaborcompensation.Therefore,understandingthemechanism
of change in the labor share of income in China and grasping the key factors for
increasing the labor share of income have important policy implications for the
current13thFive-YearPlanandforbuildingawell-offsocietyinanall-roundway
for future China.
There are several features of this book worth mentioning. First, the book has a
broad view, a reasonable framework, and strong logic. This book puts the labor’s
incomedistributionintothewholeprocessofeconomicreformanddevelopment.It
systematically analyzes the reason behind the decreasing labor share of income in
China from four levels, which are macro economy, regional difference, industrial
feature, and firm heterogeneity. By doing so, it provides some new views and
obtains some new conclusions. Second, the book has a clear focus on empirical
analysis. The book uses a large sample of micro household data, provincial panel
data, and industrial and regional survey data which increase the credibility by
makingtheresearchconclusionslyingonthesolidempiricalbasis.Third,thebook
embeds the spirit of theoretical innovation and dares to make new theoretical
generalization.Forexample,itdistinguisheshumancapitalfromrawlabortoreveal
the unmatched contribution and return of rural migrants for promoting China’s
economicgrowth.Itdemonstratesthatthechangeoftrademodeisoneofthemain
reasonsfordecreasingthelaborshareofincomebyseparateregressions.Itsupports
“Kuznetseffects”ratherthan“Kaldoreffects”byanalyzingthecorrelationbetween
industry structure and labor share of income. All the above results provide illu-
minationsfortheoreticalresearchinrelatedareas.Someideasmaybecontroversial.
Forexample,wemayquestionwhetheritisnecessarytodistinguishhumancapital
from raw labor in a new economic era where the education level has been raised
significantly from that in the past. Even so, it is helpful for promoting theoretical
deepening and innovation.
The author of this book, Dr. Minghai Zhou, is a diligent and talented young
scholarwhoalsohasastrongwill.Hecompletedhismaster’sandPh.D.programat
ZhejiangUniversity.Afterthat,hedidpostdoctoralresearchatZhejiangUniversity
for two years. During his Ph.D. study, he suffered from difficulties but faced them
with a clam attitude. He conquered the difficulties with amazing perseverance, by
studying hard and thinking diligently while in recuperation. This book is a revised
andenrichedversionofhisdoctoralthesis.Duringhisdoctoralstudy,heconducted
research projects independently at the provincial and national level. He published
several academic papers in top Chinese journals and won the nomination prize of
National Excellent 100 Doctoral Dissertations for his doctoral thesis. As an “earth
turtle” scholar, who had no experience in study abroad and who was cultivated
entirely by the domestic higher education system, he stood out in the fierce com-
petitioninthejobmarketandreceivedanofferfromaworldrenownedinternational
university as Assistant Professor in Economics, showing fully his academic
attainments,researchability,andEnglishlevel.Ashissupervisor,Iamhappytosee
Preface vii
that his research outcomes will be published in English as a book. I hope that his
book will benefit scholars at home and abroad and enhance their understanding
aboutthesituationofChina’sincomedistribution,triggermoreresearchonChina’s
income distribution issues, and provide precious references for China’s modern-
ization process. At the same time, I hope Minghai would move a step forward for
publishing more and better research outcomes and become a promising economist
in the future.
Prof. Xianguo Yao
Dean, Faculty of Social Science
Zhejiang University
Acknowledgment I
Lifeisneversomagnificent,abundantandhappyuntilinadversity.
RomainRolland
Dear readers, you can imagine my excitement after this last gentle strike on the
keyboard for stopping off the whole doctoral thesis and writing down my sincere
thanks now. In his autobiographical novel, Charles Dickens compared David
Copperfieldashismostbelovedchild.Atthismoment,Ifeelthatnoonehasloved
this child, an academic work which lasted for two years’ and demanded a lot of
energy and effort, so deeply like me.
I cherish him, not because it may have high academic value (such judgment is
entirelydependentonmyreadersandspecialists),butbecausehemakesmefeelthe
joy and pain as if a mother having a baby, and because he is the one who will
accompany me in the cheer and hardness of my doctoral life. Even now, those
framesofimagesarestillfloatinginfrontofme.WhenIwasabletounderstandand
wasilluminatedbythetopinternationaljournalsofeconomics,myheartwasfilled
with sweetness like eating honey. However, when I found that similar ideas have
already been published in top Chinese journals, feelings of regret and frustration
couldnotbecalmeddownforawhile.Inordertogetmoredetaileddatamaterials,
I traveled alone to Shanghai Library to search for data twice. On the way back
home,Iwasexcitedandplanninghowtousethesematerialsfully.However,while
manually typing tedious data for several months, I had no choice but to endure an
aching back and a suffering soul all by myself. I cannot count how many nights
I was excited by flash of ideas, climbed down from my bed, and hid in the
washroomofthedormforthepurposeofcalculationanddeduction.Icannotcount
howmanynightsItossedoverbecauseoftheunsatisfactoryprogressofmythesis,
whenmybrainwasfilledwithanxietiesandworriesandmybodywasverytiredat
thesametime.Itwasatthetimeofthe2010LunarNewYearthatIwrotemythesis
in the most intense stage. Seeing the happiness and joy of passersby on my travel
between the library and home, I could not stop myselffrom doubting the value of
such suffering efforts. However, when I received the thick piece of my own from
theprintinglady,allquestionsanddoubtsweresolvedandallworriesandanxieties
were gone.
ix
x AcknowledgmentI
Although academic research is the core of my doctoral life, the harvests offive
years’ experience are far more than I can imagine. After the normal and dull
bachelorandmaster’slife,mydoctorallifemovedupanddownasinadrama.Life
and death, love and hate, sorrow and joy, and separation and reunion flooded me
unexpectedlyliketidewater,hurtingmephysicallyandpsychologically.Luckilyfor
me, the rainbow showed after the storm and I learned “endurance,” “tolerance,”
“understanding,”and“lettinggo.”Morefortunately,thealtruisticloveandwarmth
accompaniedmewhenIwentoutinthechillywinterandwelcomedthenewspring
of life. Such invaluable experience has now become the greatest treasure for my
future life.
Ofthemanyloves,Irelymostonthemother-likecareofmydoctoralsupervisor
Prof. Wen Xiao. Professor Xiao’s rigorous academic attitude helped me to get rid
ofthebadhabitofcarelessnessandletmeknowhowthekeytoacademicresearch
isnotonlyboldinnovation,butalsocarefulthought.Everypieceofmyarticlewas
completed with the guidance of Prof. Xiao’s careful conceiving and wording. Her
ways of “training me to fish rather than giving me fish” promoted my ability of
writing greatly. In addition, her generous encouragement and praise have been
always the inexhaustible source of my learning momentum, increasing my confi-
dence in the academic road ahead. Her love and help reflected in small drips and
bits of our daily life, building home feelings in us due to her meticulous care. For
example,asherstudents,wewouldgotoherhometoeatforimprovingourlifeand
returnwithasatisfactorystomachfullofthedeliciousfoodcookedbyProf.Zhang,
herhusband.Therefore,wehadanicknameforourteamofProf.Xiao’sstudentsas
the “Xiao Family.” When I was confused, Prof. Xiao would always find a way to
comfort me. When I faced important choices, she always provided help on my
standpoint.Themostunforgettablememoryisthatshesentmeemails,askingabout
mysituationwhenshewasinJapan.WheneverIseetheseemails,mytearscannot
stop flowing. Recalling the above small things, my heart is always warm and my
eyes are always wet.
I was inspired most by the father-like care of my master’s supervisor Prof.
Xianguo Yao. He was notonly myacademic teacherbut also myspiritual mentor.
In terms of academic study, Prof. Yao’s indomitable spirit for academic research
and humanistic care for people’s benefits has become my motto for academic
research. Therefore, the topic of this Ph.D. thesis is one of my efforts for
approachingtheabovetwoaspects.Intermsofdailylife,Prof.Yao’soptimisticlife
attitudes and humorous working manners became powerful weapons with which I
faced difficulties. I remember clearly that he comforted me by using his own
example and encouraged me to do in-depth thinking about academic problems by
using the recuperation time. Under his guidance, I found my own understandings
for Chinese economy during the recuperation and contemplation, cultivating more
andmoreinterestsonacademicresearch.Usingthisopportunity,IthankProf.Yao
for bringing me into the door of exciting labor economics research, for cultivating
me with a broad mind and deep thoughts, and for teaching me like a son with
patience and tolerance.
AcknowledgmentI xi
Besidestheabovetwoteachers,Iwouldalsoliketodelivermysincerethanksto
thoseteachersthat“preach,teach,andanswer”meformymasteranddoctorallife.
They are Prof. Xianhai Huang, Prof. Jiqiang Guo, Prof. Xueya Qian, Prof. Guoda
Gu,Prof.ShuzhongMa,Prof.XukunZhang,Prof.ZhenghanCao,Prof.Yuexiang
Jiang, Prof. Xiaodi Zhang, Prof. Xuejun Jin, Prof. Hang Ye, Prof. Jinchuan Shi,
Prof. Miaojun Wang, Prof. Shiyuan Pan and Associate Prof. Zhangyong He at
Zhejiang University; Prof. Min Lu, Prof. Zhao Chen, and Associate Prof. Yuan
ZhangatFudanUniversity;Prof.ShunliYaoandProf.XiaopengYinatUniversity
of International Business and Economics; Prof. Fenglian Du at Inner Mongolia
University; Assistant Prof. Zhigang Li at Hong Kong University; Assistant Prof.
Hongliang Zhang at the Chinese University of Hong Kong; Dr. Alex Bryson at
NationalInstituteofEconomicandSocialResearch;Prof.ChrisTillyatUniversity
of California, Los Angles; Albert Park at Oxford University; and Gerhard Illing at
Munich University.
One takes on the colors of one’s company. I would like to thank my academic
brothers and sisters and classmates in the same grade. I can always find inex-
haustible sources by learning from such excellent groups. Using a fancy economic
terminology, I am the benefiter of the positive spillover of the “peer effects.”
Special thanks to Dr. Gaobang Lin who took away a lot of tedious administrative
works,makingmeashamedasthe“bigbrother.”SpecialthankstoDr.PuqingLai,
whose thoughts and spirits I admire the most. Limited by space, I cannot tell the
detailsofmythankstoeveryone,butIpromisethatthesethanksaregenuine.They
are Junjie Le, Jun Lai, Yuemei Wang, Luna Wang, Li Jiang, Qiushi Wang, Jie
Weng,WeixiangWen,YiGao,XiaohuaLi,ZhengWang,LiangcongFan,Zhiling
Huang, Liqiu Zhao, Mingrui Qiao, Sisi Pan, Guoxiang Wang, Guohua Zeng, Jing
Qu, Haifeng Zhang, Li Li, Ruixiang Chen, Ping Wang, Zhaoxi Tang, Lina Zhou,
Junzhi Zhou, Yefeng Chen, Yanxiang Sun, Weiqing Li, Wenjing Fan, Baoqing
Yin,YingWang,JingsongHe,TianHou,JuanYang,DunAi,XiaofengWu,Yijun
Chen,ChaoChen,ShaochaoWu,MingjianShu,DongchengZhang,NanTang,Sha
Deng, Xiaoyu Jiao, Xin Fang, Tongyi Wang, Lili Lu, Lina Qiao, Bing Liu,
XiaohongGu,ZhaoshiZhang,XiaohuaChen,YaoYao,GaojuYang,andJinliang
Zhao.
I would also like to deliver my sincere thanks to the members of the English
Club at Zhejiang University who made my doctoral life a colorful one and let me
knowthevalueofsincerefriendship.Thesefriendsarenowlivingacrossregionsin
China as the pillars of society. They are Yu Zhao, Jiandong Zhang, Jing Wang,
Yuanyuan Guo, Qian Guo, Zhenyu Zou, Qianlan Ma, Yao Li, Yao Xu, Ling Li,
Zheng Cao, Lili Xu, Rong Wang, Wei Si, Minyi Wang, Zhixiang Yang, Jianwei
Ye,XianliangGe,LinjieZhang,YanZhao,andChangZhou.Iwouldliketothank
my friends who encouraged and helped me for so long. They are Yijun Liu, Wei
Shi, Liang Zhang, and Liya Zhang. I would like to give my special thanks to my
belovedone,ChrisFu,whoplays theroleofashining lamp,illuminatingmyroad
ahead. I will never feel alone with you accompany along the life road.