Abstract:
This paper quantifies the impact of input distortions on the labor and capital shares in Chinese aggregate income, where the economy is allowed to have rich variations in productivity, technology, and demand elasticities. Under the nested constant elasticity of substitution demand, we decompose the share changes into changes due to within-nest distortions and between-nest distortions. We use firm-level data to estimate industryspecific production elasticities, nest-specific demand elasticities when the nest structure is not perfectly observed, and firm-specific input distortions. We find that removing input distortions in China will raise the labor share by 7 percentage points, and lower the capital share by 1 percentage point. Removing between-nest distortions explains two-third of the increase in the labor share, but offsets 90% of the decrease in the capital share caused by removing within-nest distortions.
Host: Jonas Hjort
The seminar is digital, but will be screened in room 1249 (12th floor) at Eilert Sundts Hus, Block A. The address is Moltke Moes vei 31.