The spoon curve of labor income share during the process of industrialization

GUO Jiqiang1 CAI Yuanyuan1 LIN Ping2

(1.School of Public Affairs, Zhejiang University)
(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;

【DOI】

【Funds】 Major Project of National Social Science Fund of China (11&ZD013)

Download this article

    Footnote

    [1]. 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]. 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]

    [3]. 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]

    [4]. 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]

    References

    1. Bai, C. & Qian, Z. Economic Research Journal (经济研究), (3) (2009).

    2. Chen, J. et al. The Report on Chinese Industrialization (1995–2010) (中国工业化进程报告(1995–2010)). Beijing: Social Sciences Academic Press, (2012).

    3. Chen, Z. & Zong, Z. Journal of Finance and Economics (财经研究), (2) (2014).

    4. Deng, Y. Academic Research (学术研究), (9) (2009).

    5. Guo, K. Social Sciences in China (中国社会科学), (3) (2000).

    6. He, C. 中国现代化报告:服务业现代化研究. Beijing: Beijing University Press, (2016).

    7. [Canada] Dagum, C. in Theories of income distribution. Beijing: The Commercial Press, (1995).

    8. [America] Kuznets, S. Economic Growth of Nations: Total Output and Production Structure. Beijing: The Commercial Press, (1985).

    9. Li, D. et al. Economic Research Journal (经济研究), (1) (2009).

    10. [UK] Ricardo, D. The Works and Correspondence of David Ricardo. Beijing: The Commercial Press, (1987).

    11. Lv, G. & Li, Y. Statistical Research (统计研究), (8) (2015).

    12. [UK] Feinstein, C. H. in Mathias, P. & Postan, M. M. (eds.) The Cambridge Economic History of Europe (Volume Seven). Beijing: Economic Science Press, (2004).

    13. [France] Piketty, T. Capital in the Twenty-First Century. Beijing: CITIC Press, (2014).

    14. [America] Chenery, H. et al. Industrialization and Growth: A Comparative Study. Shanghai: SDX Joint Publishing Company, (1989).

    15. Xu, C. The Journal of World Economy (世界经济), (12) (2010).

    16. Zhang, C. Problem of the labor income share in China (中国劳动报酬份额问题). Beijing: China Social Sciences Press, (2016).

    17. Allen, R. C. (2009), Engels’ Pause: Technical Change, Capital Accumulation, and Inequality in the British Industrial Revolution. Explorations in Economic History. 46 (4): 418–435.

    18. Bell, D. (1973), The Coming of Post-industrial Society: A Venture in Social Forecasting. New York: Basic Books.

    19. Blanchard, O. J., Nordhaus, W. D., and Phelps, E. S. (1997), The Medium Run. Brookings Papers on Economic Activity. 28 (2): 89–158.

    20. Brown, E. H. P., and Weber, B. (1953), Accumulation, Productivity and Distribution in the British Economy, 1870–1938. The Economic Journal. 63 (250): 263–288.

    21. Chenery, H. B. (1960), Patterns of Industrial Growth. American Economic Review. 50 (4): 624–654.

    22. Clark, C. (1958), The Conditions of Economic Progress. London: Macmillan.

    23. Cobb, C. W., and Douglas, P. H. (1928), A Theory of Production. The American Economic Review. 18 (1): 139–165.

    24. Hoffmann, W. G., Wright, J. F., Henderson, W. O., and Chaloner, W. H. (1958), The Growth of Industrial Economics. Manchester: Manchester University Press.

    25. Hoffmann, W. G. (1965), Das Wachstum der deutschen Wirtschaft seit der Mitte des 19. Jahrhunderts. Berlin: Springe.

    26. International Labor Organization (2015), Global Wage Report 2014/15: Wages and Income Inequality. Geneva: International Labor Office.

    27. Kaldor, N. (1957), A Model of Economic Growth. Economic Journal. 67 (268): 591–624.

    28. Kaldor, N. (1961), Capital Accumulation and Economic Growth. In Lutz F. A., Hague D. C. (eds.), The Theory of Capital. London: Macmillan.

    29. Kalecki, M. (1939), Essays in the Theory of Economic Fluctuations. London: George Allen & Unwin Ltd.

    30. Karabarbounis, L., and Neiman, B. (2014), The Global Decline of the Labor Share. Quarterly Journal of Economics. 129 (1): 61–103.

    31. King, W. I. (1915), The Wealth and Income of the People of the United States. London: Macmillan.

    32. Krämer, H. M. (2011), Bowley’s Law: The Diffusion of an Empirical Supposition into Economic Theory. Papers in Political Economy. 61: 19–49.

    33. Kravis, I. B. (1959), Relative Income Shares in Fact and Theory. The American Economic Review. 149 (5): 917–949.

    34. Kuznets, S. (1957), Quantitative Aspects of the Economic Growth of Nations: IV. Distribution of National Income by Factor Shares. Economic Development & Cultural Change. 7 (3): 1–100.

    35. Kuznets, S. (1966), Modern Economic Growth: Rate, Structure and Spread. New Haven: Yale University Press.

    36. Minami, R., and Ono, A. (1981), Behavior of Income Shares in a Labor Surplus Economy: Japan’s Experience. Economic Development and Cultural Change. 29 (2): 309–324.

    37. Ohkawa, K., Shinohara, M., and Meissner, L. (1979), Patterns of Japanese Economic Development: A Quantitative Appraisal. New Haven: Yale University Press.

    38. Schuller, G. J. (1953), The Secular Trend in Income Distribution by Type, 1869–1948: A Preliminary Estimate. The Review of Economics & Statistics. 35 (4): 302–324.

    39. Tripp, L. R. (1951), Labor’s Share in the National Income. The Annals of the American Academy of Political and Social Science. 274: 47–56.

    40. US Bureau of the Census (1975), Historical Statistics of the United States, Colonial Times to 1970 Part 2. Washington, D. C.: Government Printing Office.

    41. Whittaker, D. H., Zhu, T., Sturgeon, T., Tsai, M. H., and Okita, T. (2010), Compressed Development. Studies in Comparative International Development. 45 (4): 439–467.

    42. Xie, D. D. (2011), A Generalized Fact and Model of Long-Run Economic Growth: Kaldor Fact as a Special Case. Working Paper Series WP11-4, Peterson Institute for International Economics. 27 (2): 319–341.

This Article

ISSN:1000-7881

CN: 11-1043/C

Vol , No. 06, Pages 17-29+126

December 2018

Downloads:0

Share
Article Outline

Abstract

  • 1 Research questions and methods
  • 2 Statistical surveys based on the history of several industrialized countries
  • 3 Spoon curve of labor income share
  • 4 Robustness test of spoon curve
  • 5 Analysis of the reasons for the change of the spoon curve of labor income share
  • 6 Conclusion and implication
  • Footnote

    References