Factor Shares in China's Industrial Sector——Analysis from the View of Directed Technical Change

Finding the reason for the decline in labor share is significant to solve the problem that factor shares structure continues to be unbalanced.This paper analyzes the factor shares in China's industrial sector from the view of industrial structure,and then applies the three-equation normalized supply-side system under the CES function to estimate the elasticity of substitution in industrial sector during the period of 1985-2011,measures the directed technical change and its effect on factor shares.The results show that:the change of factor shares in China's industrial sector is dominated by directed technical change,and the effect of industrial structure is limited.Technical change in industrial sector is directed to capital,raising the capital shares and reducing the labor shares,and shows phased features.During the period of 1985-1996,the technical change is biased to labor in industrial sector and manufacturing,raising the labor shares by 0.0504 and 0.0570 respectively.From 1997 to2011,the capital-biased technical change in the two sectors lower the labor shares by 0.1061 and 0.1246 respectively.Therefore,the role of directed technical change in raising the labor productivity and optimizing factor shares is important.