Abstract:
A new explanation for the declining of labor income share in China is given from the perspective of labor force protection. Employing 2000-2012 provincial level panel data and using labor win rate in labor dispute cases as a proxy to measure labor force protection, it is found that labor force protection significantly improves labor income share, on average one percentage increase in labor protection would increase 0.130 percentage in labor share. After the enforcement of labor contract law in 2008, the coefficient of labor protection is increased from 0.089 to 0141, and the significance level is increased from 5% to 10%. The policy implication could be derived from above results is that improving the implementation of the labor contract law and other policies, as ways to improve the degree of labor force protection, is helpful to increase the labor income share.