| Abstract: | China＇s unequal income distribution is to a large extent expressed in unequal functional income distribution, that is, as China＇s economy develops, the share of wage income in national income falls. The unlimited supply of labor under China＇s current dual economic structure is the major reason for this. In a disequilibrium dynamic model framework with Keynesian features, empirical analysis shows that the unlimited supply of labor not only prevents wages from responding to supply and demand situation in the labor market, but also makes them insensitive to labor productivity and price changes. This suggests that when there is a rise in labor productivity or prices following economic growth, the rise in wages may not be sufficiently marked. The benefits derived from economic growth or labor productivity increases have been, to a very large extent, converted into profits and not wages. Therefore, if we are to reverse China＇s worsening income distribution, our fundamental path should remain the maintenance of high-speed growth and the acceleration of urbanization and industrialization so that surplus rural labor can be absorbed as soon as possible. |
