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China’s labor-capital ratio human capital accumulation, and labor wage: an empirical analysis using a VAR model

Qian, Xiaoye, Wang, Haiqian, Zhao, Yinglan and Zhao, Yiruo (2022) China’s labor-capital ratio human capital accumulation, and labor wage: an empirical analysis using a VAR model. In: ICMSEM 2022: Proceedings of the Sixteenth International Conference on Management Science and Engineering Management. Lecture Notes on Data Engineering and Communications Technologies,2. Springer Science and Business Media Deutschland GmbH, 381 - 396.

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Identification Number: 10.1007/978-3-031-10385-8_28

Abstract

China’s labor-capital ratio (L-C ratio) has fallen sharply over the past two decades, indicating that labor is increasingly being replaced by capital. However, research on the L-C ratio trend is inadequate, especially regarding the driving force and its impact. This study focuses on the relationship between China’s L-C ratio and human capital accumulation by applying the panel vector auto-regression (PVAR) approach. Using a panel data of 30 Chinese provinces for 1997–2014, the analysis yields the following findings: First, the L-C ratio has a negative impact on human capital accumulation, suggesting that the major driving force of the L-C ratio’s sharp decline is the demand-side driving force, rather than the supply-side. Second, the decline of the L-C ratio is majorly driven by the demand-side factors after the Labor Contract Law, but by the supply-side factors before the law, suggesting that the Labor Contract Law has greatly changed the demand-supply balance of China’s labor market. Third, the L-C ratio has a negative effect on labor wages by increasing regional human capital accumulation, suggesting that employees can increase their wages through human capital investment in reaction to the decline in the L-C ratio.

Item Type: Book Section
Official URL: https://link.springer.com/book/10.1007/978-3-031-1...
Additional Information: © 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.
Divisions: Management
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Date Deposited: 09 Aug 2022 16:51
Last Modified: 15 Sep 2022 07:36
URI: http://eprints.lse.ac.uk/id/eprint/115942

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