Towards Common Prosperity: Accelerated Depreciation Policy of Fixed Assets and Labor Income Share
Abstract
:1. Introduction
2. Literature Review
2.1. The ADP: Economic Impact
2.1.1. Research on Labor Force Employment
2.1.2. Research on the Enterprise Human Capital Structure
2.1.3. Research on Enterprise Fixed Asset Investment
2.2. Influence Factors in the Labor Income Share
2.2.1. Measuring Labor Income Share
2.2.2. Substitution Effect Between Capital and Labor
2.2.3. Tax Policy
3. Background and Theoretical Hypotheses
3.1. Background
3.2. Theoretical Hypotheses
3.2.1. Relationship of the ADP to Enterprises’ Labor Income Share
3.2.2. Mechanisms of Human Capital Structure Adjustment
3.2.3. Mechanisms of Rent Sharing
4. Research Design
4.1. Data
4.2. Model
4.3. Description of Variables
- Definition of treatment group industries. In this paper, pilot industries were defined with reference to the notice. The remaining industries were considered to be non-pilot industries, among which industry classification standards referred to the Industry Classification Code of National Economy (GB/T4754−2011).
- Explained variables. In the new era, raising the labor income share has significance for narrowing the income gap. Therefore, we selected the enterprise labor income share as the explained variable. Following Bai et al. (2008), value added (of the factor cost method) was used for estimation. That is to say, the enterprise labor income share amounts to revenues allotted for staff/(business revenue − business cost + cash paid to and for staff + fixed asset depreciation).
- Explanatory variables. Treat × Post is the core explanatory variable that this research focuses on. This indicates that an enterprise enjoying the ADP has a value of 1 from the start date of the policy and thereafter, and 0 otherwise.
- Control variables. In this paper, control variables were mainly chosen as follows: Size, Age, Lev, Indept, Roa, Grow, PPE, Capital, Top1, GDP, and IndStr. Table 3 presents detailed definitions for the control variables.
4.4. Descriptive Statistics
5. Results and Discussion
5.1. Baseline Regression Results
5.2. Robustness Test
5.2.1. Dynamic Effect Analysis
5.2.2. Placebo Test
5.2.3. Double Machine Learning Model
5.2.4. Alternative Metrics for the Labor Income Share
5.2.5. Expected Effect Test
5.2.6. Exclusion of Other Policy Implications for the Sample Period
5.3. Further Analysis
6. Mechanism Test and Heterogeneity Analysis
6.1. Mechanism
6.1.1. Impact on Human Capital Structure
6.1.2. Impact on Enterprise Rent
6.2. Heterogeneity Analysis
6.2.1. Ownership Differences
6.2.2. Scale Difference
6.2.3. Differences in Financing Constraints
6.2.4. Differences in Factor Intensity
6.2.5. Differences Between Manufacturing and Service Industries
6.2.6. Differences in Labor Skill Levels
7. Conclusions
Author Contributions
Funding
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Research Area | Policy Impact | Reference | Research Findings |
---|---|---|---|
Labor force employment | Investment growth | House and Shapiro (2008) | The policy resulted in 100,000 to 200,000 new job positions. |
Ohrn (2019) | The policy absorbed employment and slightly improved wage levels. | ||
Garrett et al. (2020) | The policy absorbed employment and slightly improved wage levels. | ||
No significant impact | Yagan (2015); Button (2019) | The policy did not play a significant role in absorbing employment. | |
Enterprise human capital structure | Skill upgrading | Liu and Mao (2019) | The policy prompted equipment updates, replacing low-skilled workers with high-skilled ones. |
Workforce restructuring | Liu and Mao (2019) | The affected enterprises increased skilled workers and decreased routine workers. | |
Labor ratio improvement | Liu and Zhao (2020) | The policy encouraged fixed asset additions and improved the ratio of skilled to unskilled labor. | |
Enterprise fixed asset investment | Investment growth | Hall and Jorgenson (1967) | The ADP improved investment behavior through a reduction in capital user cost. |
Zwick and Mahon (2017) | The policy stimulated significant growth in enterprise investment. | ||
Ohrn (2019) | Short-term tax incentives from ADP lowered investment costs, particularly for financially constrained firms. | ||
Fan and Liu (2020) | The policy enhanced investment efficiency based on data from Chinese listed firms. |
Research Area | Influence on LS | Reference | Research Findings |
---|---|---|---|
Capital–labor substitution | Decrease | Karabarbounis and Neiman (2014); Bentolila and Saint-Paul (2003) | Capital deepening affects the labor income share due to falling capital goods prices. |
Benzell et al. (2015) | AI squeezes out the labor income share by increasing the ratio of intangible assets. | ||
Alvarez-Cuadrado et al. (2018) | Capital bias stimulates capital input, weakening the labor income share. | ||
Barkai (2020) | Higher returns on non-labor factors lead to a drop in the labor income share. | ||
Acemoglu and Restrepo (2022) | Technological progress favors capital, reducing the labor income share. | ||
Tax policy | Increase | Deran (1967) | Social security tax reduces the capital share, increasing the labor income share. |
Decrease | Yang and Zhang (2021) | Investment incentive effect of the reform declines the labor income share. | |
Li et al. (2021) | Lowering income tax rates reduces the labor income share. |
Variable Name | Variable Symbol | Definition |
---|---|---|
Enterprise size | Size | The natural logarithm of total corporate assets |
Enterprise age | Age | The natural logarithm of the establishment years of the enterprise |
Asset–liability ratio | Lev | Total liabilities/Total assets |
Ratio of independent directors | Indept | Independent directors/Total directors |
Profitability | Roa | Net profit/Total assets |
Enterprise growth | Grow | Market value of corporate equity + Book value of liabilities/Total assets |
Capital–output ratio | PPE | Net fixed assets/Total operating income |
Capital intensity | Capital | Total assets/Total revenue |
Large shareholder ownership ratio | Top1 | Number of shares held by the largest shareholder /Total shares outstanding |
Regional economic development level | GDP | The natural logarithm of GDP in the city where the enterprise is registered |
Industrial structure | IndStr | The proportion of the secondary industry in GDP of the province where the company is registered |
N | Mean | Std | Min | Median | Max | |
---|---|---|---|---|---|---|
LS | 14,213 | 0.2923 | 0.1201 | 0.0569 | 0.2805 | 0.7176 |
Size | 14,213 | 22.4592 | 1.3489 | 19.4769 | 22.2799 | 26.3760 |
Age | 14,213 | 2.8255 | 0.3820 | 2.0794 | 2.8332 | 3.4012 |
Lev | 14,213 | 0.4391 | 0.1997 | 0.0511 | 0.4352 | 0.9519 |
Indept | 14,213 | 0.3746 | 0.0538 | 0.3333 | 0.3333 | 0.5714 |
Roa | 14,213 | 0.0407 | 0.0606 | −0.2390 | 0.0378 | 0.2264 |
Grow | 14,213 | 2.0314 | 1.3124 | 0.8343 | 1.6031 | 8.4958 |
PPE | 14,213 | 0.4246 | 0.3750 | 0.0370 | 0.3099 | 2.0339 |
Capital | 14,213 | 2.3411 | 1.8400 | 0.4600 | 1.8216 | 12.2596 |
Top1 | 14,213 | 0.3408 | 0.1487 | 0.0838 | 0.3185 | 0.7457 |
GDP | 14,213 | 8.9924 | 1.1024 | 6.2238 | 9.1170 | 10.6739 |
IndStr | 14,213 | 0.4025 | 0.1176 | 0.1580 | 0.4160 | 0.6390 |
(1) | (2) | |
---|---|---|
LS | LS | |
Treat × Post | 0.0180 *** (0.0044) | 0.0177 *** (0.0035) |
Controls | No | Yes |
Year FE | Yes | Yes |
Enterprise FE | Yes | Yes |
N | 14,213 | 14,213 |
R2 | 0.7341 | 0.8266 |
(1) | (2) | |
---|---|---|
LS | LS | |
Treat × Post | 0.0589 *** | 0.0594 *** |
(0.0035) | (0.0035) | |
Linear term | Yes | Yes |
Quadratic term | No | Yes |
Year FE | Yes | Yes |
Enterprise FE | Yes | Yes |
N | 14,213 | 14,213 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Alternative Metrics for Labor Income Share | Rejection Sample | |||
LS_1 | LS_2 | LS | LS | |
Treat × Post | 0.0604 *** | 0.0205 *** | 0.0221 *** | 0.0178 *** |
(0.0166) | (0.0055) | (0.0039) | (0.0036) | |
Controls | Yes | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes | Yes |
Enterprise FE | Yes | Yes | Yes | Yes |
N | 14,213 | 14,213 | 12,935 | 13,551 |
R2 | 0.7477 | 0.6153 | 0.8279 | 0.8272 |
(1) | (2) | |
---|---|---|
lnemp | lnkl | |
Treat × Post | 0.0788 *** | 0.0730 ** |
(0.0238) | (0.0233) | |
Controls | Yes | Yes |
Year FE | Yes | Yes |
Enterprise FE | Yes | Yes |
N | 14137 | 13625 |
R2 | 0.9464 | 0.8870 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Skill | Unskill | Skill_Rate | LS | lnrent | LS | |
Treat × Post | 0.0525 *** | −0.0233 | 0.0486 *** | 0.0611 *** | 0.2040 *** | 0.0159 *** |
(0.0148) | (0.0397) | (0.0147) | (0.0156) | (0.0294) | (0.0039) | |
skill_rate | 0.1072 *** | |||||
(0.0319) | ||||||
lnrent | 0.0575 *** | |||||
(0.0034) | ||||||
Controls | Yes | Yes | Yes | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
Enterprise FE | Yes | Yes | Yes | Yes | Yes | Yes |
N | 6711 | 7527 | 7107 | 7107 | 13,410 | 13,410 |
R2 | 0.9355 | 0.9503 | 0.9157 | 0.8080 | 0.8146 | 0.7794 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Ownership | Scale | Financing Constraints | ||||
State-Owned | Private | Large | Middle and Small | High | Low | |
Treat × Post | 0.0078 | 0.0207 *** | 0.0030 | 0.0175 *** | 0.0139 *** | 0.0082 |
(0.0059) | (0.0043) | (0.0046) | (0.0048) | (0.0040) | (0.0055) | |
Controls | Yes | Yes | Yes | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
Enterprise FE | Yes | Yes | Yes | Yes | Yes | Yes |
N | 5826 | 8387 | 8480 | 5733 | 7066 | 7147 |
R2 | 0.8373 | 0.8329 | 0.8638 | 0.8379 | 0.8654 | 0.8634 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Factor Intensity | Industry | Labor Skill Level | ||||
Capital Intensive | Labor Intensive | Manufacturing | Services | High | Low | |
Treat × Post | 0.0297 *** | 0.0062 | 0.0193 *** | 0.0101 | 0.0155 *** | 0.0505 |
(0.0075) | (0.0054) | (0.0047) | (0.0096) | (0.0037) | (0.0277) | |
Controls | Yes | Yes | Yes | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
Enterprise FE | Yes | Yes | Yes | Yes | Yes | Yes |
N | 7770 | 6443 | 7720 | 3825 | 7066 | 7147 |
R2 | 0.8094 | 0.8500 | 0.8181 | 0.8284 | 0.8455 | 0.8902 |
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Yang, Y.; Zeng, B. Towards Common Prosperity: Accelerated Depreciation Policy of Fixed Assets and Labor Income Share. Int. J. Financial Stud. 2025, 13, 46. https://doi.org/10.3390/ijfs13010046
Yang Y, Zeng B. Towards Common Prosperity: Accelerated Depreciation Policy of Fixed Assets and Labor Income Share. International Journal of Financial Studies. 2025; 13(1):46. https://doi.org/10.3390/ijfs13010046
Chicago/Turabian StyleYang, Ying, and Bing Zeng. 2025. "Towards Common Prosperity: Accelerated Depreciation Policy of Fixed Assets and Labor Income Share" International Journal of Financial Studies 13, no. 1: 46. https://doi.org/10.3390/ijfs13010046
APA StyleYang, Y., & Zeng, B. (2025). Towards Common Prosperity: Accelerated Depreciation Policy of Fixed Assets and Labor Income Share. International Journal of Financial Studies, 13(1), 46. https://doi.org/10.3390/ijfs13010046