Firms’ Risk and Labor Income Share: Evidence from China’s Industrial Sector
Read
DownLoad |
| Title | Firms’ Risk and Labor Income Share: Evidence from China’s Industrial Sector
|
| Author | Jia Shen and Shen Guangjun |
| Organization | Development Research Center of the State Council;School of Economics, Central University of Finance and Economics |
| Email | js@drc.gov.cn；hnshgj@126.com |
| Key Words | Labor Income Share; Firms’ Risk; Wage Contract; Industrial Sector |
| Abstract | The declining labor income share has arouse wide public concern. This study focuses on labor income share in China’s industrial sector and pays particular attention to the role of firms’ risk. Based on Holmstr?m and Milgrom (1987), theoretical model illustrates that decreasing risk encourages employees to work harder, resulting in higher output and wage. Since output grows faster than wage does, labor income share decreases. Empirical analysis shows positive correlation between firms’ risk and labor income share, which is robust to alternative measurement of risk and various specifications. We also explore the mechanism and find consistent evidence: output grows faster than wage and fixed wage share drops while risk descends. |
| Serial Number | WP921 |
| Time | 2015-09-22 |
|