Why Does China’s Labor Income Share Tend to Decline?* – From the Perspective of Population Age Structure Change

Wei Xiahai1, Dong Zhiqiang 1,2 and Zhao Qiuyun
1 School of Economics & Management, South China Normal University, Guangzhou, China
2 South China Research Center For Market Economy, South China Normal University, Guangzhou, China

 
Abstract: Using a theoretical model, this article concludes that age structures influence people’s propensity to save and thereby influence their capital intensity. In the context that capital and labor are in a substitutional relation, increased capital intensity may lead to a drop of labor income share. We perform empirical research with provincial-level data from 1990 to 2007 and have proved that the rising of the old dependency ratio and the decrease of the children dependency rate both contribute to the fall of labor income share. This assumption still holds true after the authors control the influences of other potential factors that may influence labor income share
Keywords: population age structure, labor income share, aging

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