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Technical Change and Income Inequality in China

Author:  Xun Zhang¡¢Guanghua Wan¡¢Chen Wang¡¢Zhi Luo(department of economics)
Publication:  ¡¶The World Economy¡·£¬2017£¬Vol.40, Issue 11£¬Pages 2378¨C2402
Abstract:  The purpose of this paper was to explore the inequality¨Ctechnical change relationship. Different from earlier studies, we aim to gauge the impact of technical change on the overall inequality, not just a particular component of inequality. This is achieved by establishing that the labor share of income is negatively correlated with overall inequality as indicated by the popular Gini coefficient and by modelling the labor share of income as a function of technical change. The empirical model of labor share of income is estimated using 1978¨C2012 provincial panel data from China. The main estimation results show that technical change in China had been mostly capital-biased. It contributed to the successive reductions in China¡¯s labor share of income and thus rapid rises in income inequality.

¡¾Keywords¡¿: Inequality; Technical Change; Labor Share of Income; Functional Distribution of Income, China