The Effect of Exports on Labor Share: A Semiparametric Approach Using Chinese Manufacturing Panel Data

Jinjing Tian, Taining Wang, Joshua Hall   Published : February, 2021   JEL Code: C14 · F16 · F66 · O50   URL to this Article: https://onlinelibrary.wiley.com/doi/abs/10.1111/twec.13116

Abstract

We distinguish the effects of export on labor share into a stand‐alone direct effect and indirect effects, which alter the marginal impact of three key determinants of labor share found in the literature. While the direct effect of export has been extensively studied, the potential indirect effects remain unexplored. We investigate both effects of exports using micro‐level Chinese firm‐level data from 1998‐2007. We employ a fixed‐effect varying coefficient model to reveal the potential nonlinearity of the effects of exports while alleviating the risk of model mis‐specification. Our model is estimated by a spline‐backfitted kernel estimator, which is more efficient and computationally attractive than alternative estimators. We find that while exports directly increase labor share as expected, it declines labor share indirectly through intensifying the negative marginal impact of firms’ capital intensity, monopoly power, and capital‐augmented technological progress on labor share. As a result, the net effect of exports is not beneficial to labor's share of income, and varies in magnitude across firm characteristics, regions, and time periods.

Keywords

Labor share; export; globalization; varying coefficient model; fixed-effect semiparametric panel model