| Abstract | The financialization of capital is a new perspective to analyze the labor share. We build an analytical framework based on " Flow of Funds Accounts " and analyze the labor share in China. The results show that since 2001, the financialization of capital has reduced the labor share and exceeded the sum of other effects for 7 years. It means that, the institutional arrangements of the capital market have a significant impact on the labor share. The effect of the physical transaction capital ratio, the effect of the financing structure, the effect of the territory capital source and the effect of the cross-border capital sources have important influence on the change of the labor share. It means that the fund raising, allocation and use have important effect on the labor share. The financial system depends on the credit channel, pushed up asset prices and lowered labor share. To solve the problem of functional distribution and form a fair and reasonable distributional pattern, the influence from the financial system should be considered. |