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This chapter discusses the research development of factor income distribution. In the following, we are going to review related research about labor’s share of income, which is a commonly used proxy for factor income distribution. We will not only discuss the research development based on the decline of labor’s share of income mainly in European countries from 1980s, but also examine the development of literature on the recent decline of labor’s share of income in China, starting from mid-1990s. By reviewing past research outcomes both at home and abroad, it is found that the decline of labor’s share of income is closely related to “two transitions” of world economy after the middle of 20th century.

This chapter decomposes the movement of labor’s share of income into employment, compensation and output effects since China’s reform and opening up. We find that the movement of labor’s share of income is mainly determined by the net effects of the opposite movement of compensation and output, and the employment effect is relatively small. Meanwhile, the paper distinguishes the decomposition of nominal and real labor’s share of income, and finds that the real labor’s share of income by considering the price factors reflects the current situation of national income distribution of China.

This chapter decomposes the labor’s share of income in industrial sector and finds the movement of industrial structure within the industrial sector explains minor part of the reason for declining labor’s share of income. We also analyze the effects of trade, technological progress and state-owned monopoly power by using the production cost model. It indicates that technological progress and decrease of monopoly power will impose a decrease on labor’s share of income. Ceteris paribus, the coefficient of import penetration rate in the trade variables is positive and significant. Regression in different stages shows that the changing of trade mode is main reason for declining labor’s share of income. In the time of import–export related processing trade in Pearl River delta, import penetration rate promote labor demand thus raise the labor’s share of income. While, in the time of export-led processing trade in Yangtze River delta, the simultaneous decline of import penetration rate and labor’s share of income is the result of lowering raw material and labor cost from profit maximizing enterprises. Therefore, the import penetration has different mechanisms on labor’s share of income in different development stages in China.

This chapter re-measures the labor’s share of income of income since the reform and opening up by amending and supplementing the corresponding data during 2004–2007. We find that the labor’s share of income decreases steadily after 1998. This chapter also further divides labor into raw labor and human capital. By using the individual level data of UHS, we find the human capital’s share of income has increased rapidly while the raw labor’s share of income decreases steadily during 1988–2007. By using extended MRW growth framework, we find that the movement of China’s national income distribution pattern is closely related to the unbalanced growth of three factors which are physical capital, human capital and raw labor.

This chapter provides new estimation of the labor’s share of income, distinguishes the nominal and real labor’s share of income, and discusses the impacts of such distinction on the movement trends of China’s labor’s share of income. We find that the real labor’s share of income by considering the price factors is lower than the estimated nominal value in the literature by 6–14 % with higher and longer decreasing trend, indicating the worsening situation of national income distribution and matching with the direct feeling of income distribution by ordinary workers.

This chapter constructs a theoretical model from the micro firm perspective and analyses the firm heterogeneity that will lead to significant differences among different types of firms. The theoretical model is extended to three types of firms those that are state-owned, private and foreign enterprises. Thus, this chapter discusses the impact of ownership restructuring of state-owned enterprises, privatization, and entry of foreign investment on the labor’s share of income during China’s economic transition and opening process. Utilizing the World Bank Investment Climate Survey, the paper investigates the difference of the labor’s share of income by types of ownership, and claims that change of ownership structure will reduce factor distortion and promote economic efficiency, which in turn will impose a positive and transitory impact on the decreasing labor’s share of income. By using System-GMM estimation, it shows that, after controlling for other factors, firm with private and foreign ownership have negative impacts on the labor’s share of income. By examining time series change of state-owned enterprises, it finds that their productivity rises dramatically two years after the ownership restructuring. The chapter also introduces the government enterprise relationship variable, which shows that competition among local government in attracting foreign enterprises in order to pursue GDP does exist. Finally, it is shown that the “foreign investment led” feature of China’s export enterprises may be the reason of the failure of neoclassic trade theory prediction for China.

All that we know about the Chief Executive Officer (CEO) labour market in China comes from the studies of public listed companies and State-owned Enterprises (SOEs). This is the first attempt to examine the operation of the CEO labour market across all industrial sectors of the Chinese economy. We find that the influence of the State extends beyond SOEs into many privately owned firms. Government is often involved in CEO appointments in domestic firms and, when this is the case, the CEO has less job autonomy and is less likely to have pay linked to firm performance. Nevertheless, we find that incentive schemes are commonplace and include contracts linking CEO pay directly to firm performance, annual bonus schemes, the posting of performance bonds, and holding company stock. The elasticity of pay with respect to company performance is one or more in two-fifths of the cases where CEOs have performance contracts, suggesting many face high-powered incentives. We also show that State-owned and domestic privately owned firms are more likely than foreign-owned firms to use incentive contracts.