Accounting for Labor Input in Chinese Industry, 1949-2009

Author Name Harry X. WU  (Hitotsubashi University) /Ximing YUE  (Renmin University of China)
Creation Date/NO. October 2012 12-E-065
Research Project East Asian Industrial Productivity Project
Download / Links


Following the user cost theory on measuring labor input, after a careful scrutiny of available information, we construct employment and compensation matrices for China's industrial workforce over the period 1949-2009. Our measures are able to capture both individual and interactive effects of changes in gender, age, education, industry and ownership types of China's industrial workforce, and decompose the growth of labor input in Chinese industry into quantity and composition ("quality") effects. We find that the annual growth of the labor input in Chinese industry experienced a substantial decline from 6.9% per annum in the pre-reform period to 3.8% per annum in the post-reform period. Change of labor composition accounted for about 12% in the planning period (or 0.8% growth per annum), but it made little contribution during the reform period. We also find that the changes in industrial structure and age structure (reflecting the effects of seniority and experience) almost explained for the entire (positive) change in labor composition in the planning period. However, the change of education turned into negative after 1965 which made the average contribution of education negative in the planning period. Following the reform, education showed the most important contribution in the 1990s when the reform deepened, but the effect turned into negative again alongside China's entry into the World Trade Organization (WTO).