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Labor Shortage, Factor Market Distortion and Technological Progress of Chinese Manufacturing Enterprises
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TitleLabor Shortage, Factor Market Distortion and Technological Progress of Chinese Manufacturing Enterprises  
AuthorYang Xianming, Liu Zheng and Kuang Huishu  
OrganizationSchool of Developmdent Studies, Yunnan University of China; HKARC in Faculty of Mangement & Economics, KMUST of China;Postdoctoral Research Station, Yunnan University of China;;; 
Key WordsLabor Shortage; Factor Market Distortion; Enterprise Technological Progress; Price Effects; Market Size Effects 
AbstractSince the rich labor endowment is no longer exists and the technological efficiency is far from achieving, how to speed up the labor shortage inward the spontaneous technological progress and realize endogenous economic growth is central to China today. This article, based on two typical new facts of decrease in number of migrant workers and the long-standing of factor market distortion in China, starts with the structure of factor endowments and tries to systematically investigate the mechanism and empirical evidence of labor shortage and factor market distortion on technological progress of Chinese manufacturing enterprises. We find the shortage of labor really induce the enterprises’ innovation, which means there is a causality mechanism of labor short on technological progress. Next, when it comes to the mechanism, we find the labor shortage and the other affluent factors such as capital and land promote firm’s innovation through a ‘price effect’ and ‘market size effect’ respectively, and ultimately the ‘price effect’ dominates and induces enterprises to innovate through saving the high cost of expensive labor channel. In further study we also find the factors distortion in labor, finance and land market weaken the ‘price effect’ from labor shortage to innovation and hence indirectly inhibit the technical progress in the end, which indicates that enhancing the price adjustment and fair allocation mechanism of factor market are the premise to accelerate technological progress and realize technology catching up in China.  
Serial NumberWP1381 
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