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Biased Efficiency Improvement and Fluctuation of China’s Factor Income Share
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TitleBiased Efficiency Improvement and Fluctuation of China’s Factor Income Share  
AuthorFu Xiaoxia and Wu Lixue  
OrganizationBusiness School, Central University of Finance and Economics;Institute of Industrial Economics, Chinese Academy of Social Sciences; 
Key WordsBiased Efficiency Improvement; Labor Income Share; CES Production Function System; Technological Progress Path 
AbstractThis paper investigates the mechanism of China’s factor income distribution from the aspect of the biased efficiency improvement. We develop an empirical model of China’s factor income share determination and then estimate the efficiency improvement and the substitution elasticity of capital and labor input based on the CES production function system, which consists of both the aggregate output production function and relative factor income share equation. According to provincial panel data from 1978 to 2009, we find that labor-saving technological change dominates China’s productivity growth more and more heavily from the start of the reform and draws up the relative demand of capital, which in turn reduces the share of labor income. This means that the catching-up strategy of technological progress only relying on the tech-imports and imitations will do harm to the economic development in the long run while speed up growth in the short. The appropriate path of productivity growth, which adapts to the factor endowment by prompting independent innovations, is crucial to rebalance China’s functional distribution and economic structure. 
Serial NumberWP312 
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