The spoon curve of labor income share during the process of industrialization
(2.Center of Social Welfare and Governance, Zhejiang University)
【Abstract】On the premise of complete stage division and comparable statistical scope, this paper conducts a historical investigation on the evolution of labor income share in the UK, the United States, France, Germany and Japan from the middle or late eighteenth century to the early twenty-first century, and it explains the differences or contradictions between the commonly believed descent hypothesis, stability hypothesis, U-shaped hypothesis and cubic hypothesis. The research finds that (1) the changing track of labor income share in the process of industrialization was like the spoon curve. In the early stage of industrialization, the labor share first decreased, and then it experienced a remarkable recovery in the middle stage of industrialization. Then, labor share remained relatively stable before a slight decline in the post-industrial stage. (2) Viewing the share of labor income as the “cheese” of laborers, the “cheese” loss in the early stage of industrialization could be recovered during the middle and late stages. This paper suggests that it is more important and urgent for China to grasp the time-bound window of opportunity to promote labor share in the middle and late stages of industrialization.
【Keywords】 labor income share; industrialization process; spoon curve; Kaldor’s facts;
. ① GDP per capita and the share of labor income are both affected by some factors in the process of industrialization, and are the outcome variables of the industrialization process. Different economic structures, and different market and technological characteristics in different stages of industrialization are the fundamental reasons to push the share of labor income to evolve into the path of change. Simply examining the functional relationship between GDP per capita and labor income share is easy to focus on the superficial relationship but ignore the internal relationship. [^Back]
. ② The measurement method adopted by Xie (2011) has inevitably endogenous problems, which restrict the reliability of regression coefficient estimation and significance test results. The obtained cubic curve may be caused by measurement errors. In addition, the characteristic of cubic curve implies that the share of labor income continues to decline after the second turning point, and even there is the possibility of approaching zero. [^Back]
. ① There are many missing data of Japan. Based on the existing data, this paper makes a rough judgment on the trend of labor income share. [^Back]
. ① Kuznets (1966) divided the income of the individual economy between labor and assets, and proposed two different methods of division according to the hypothesis of the proportion of labor remuneration in the individual economy. [^Back]
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