Explaining the decline of China's labor share: A wide replication of Oberfield and Raval (2021)

Hong Yang and Wen Zhang

Journal of Applied Econometrics, 2024, vol. 39, issue 6, 1190-1197

Abstract: China's labor share has declined since late 1990s. Using the methodology developed by Oberfield and Raval, this paper estimates China's aggregate capital‐labor elasticity of substitution, leveraging the estimated micro‐level elasticities. The findings indicate that China's aggregate capital‐labor elasticity falls within the range of 0.9 to 1. Utilizing this estimated aggregate elasticity for labor share decomposition, we find that the bias of technical change emerges as the predominant factor driving the decline in labor share.

Date: 2024
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