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Local government debt and labor income share: Evidence from China

This study employs a CES production function to construct a theoretical model of labor income share and uses a two-way fixed effects model to test the causal effects of local government debt (LGD) on the labor income share of enterprises. Local government debt governance policies are utilized as exo...

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Detalles Bibliográficos
Autores principales: Wu, Yuanlin, Tian, Cunzhi, Li, Lifang
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10602349/
https://www.ncbi.nlm.nih.gov/pubmed/37883481
http://dx.doi.org/10.1371/journal.pone.0293494
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author Wu, Yuanlin
Tian, Cunzhi
Li, Lifang
author_facet Wu, Yuanlin
Tian, Cunzhi
Li, Lifang
author_sort Wu, Yuanlin
collection PubMed
description This study employs a CES production function to construct a theoretical model of labor income share and uses a two-way fixed effects model to test the causal effects of local government debt (LGD) on the labor income share of enterprises. Local government debt governance policies are utilized as exogenous shocks, and a DID (Difference-in-Differences) model is applied for endogeneity testing. The results have passed a series of robustness checks. The findings suggest that LGD decreases the share of firms’ labor income. The mechanism analysis suggests that LGD lowers the labor remuneration of residents, the employment of labor in enterprises, and the size of bank loans mainly; while raising the cost of using funds in enterprises. Moreover, this negative effect is more apparent in non-state-owned enterprises, small and medium-sized enterprises, and enterprises with high financing constraints. This study presents new evidence on how the labor income share of enterprises is affected from the perspective by local governments in China. It has important implications for further deepening local government debt governance and achieving common prosperity.
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spelling pubmed-106023492023-10-27 Local government debt and labor income share: Evidence from China Wu, Yuanlin Tian, Cunzhi Li, Lifang PLoS One Research Article This study employs a CES production function to construct a theoretical model of labor income share and uses a two-way fixed effects model to test the causal effects of local government debt (LGD) on the labor income share of enterprises. Local government debt governance policies are utilized as exogenous shocks, and a DID (Difference-in-Differences) model is applied for endogeneity testing. The results have passed a series of robustness checks. The findings suggest that LGD decreases the share of firms’ labor income. The mechanism analysis suggests that LGD lowers the labor remuneration of residents, the employment of labor in enterprises, and the size of bank loans mainly; while raising the cost of using funds in enterprises. Moreover, this negative effect is more apparent in non-state-owned enterprises, small and medium-sized enterprises, and enterprises with high financing constraints. This study presents new evidence on how the labor income share of enterprises is affected from the perspective by local governments in China. It has important implications for further deepening local government debt governance and achieving common prosperity. Public Library of Science 2023-10-26 /pmc/articles/PMC10602349/ /pubmed/37883481 http://dx.doi.org/10.1371/journal.pone.0293494 Text en © 2023 Wu et al https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Wu, Yuanlin
Tian, Cunzhi
Li, Lifang
Local government debt and labor income share: Evidence from China
title Local government debt and labor income share: Evidence from China
title_full Local government debt and labor income share: Evidence from China
title_fullStr Local government debt and labor income share: Evidence from China
title_full_unstemmed Local government debt and labor income share: Evidence from China
title_short Local government debt and labor income share: Evidence from China
title_sort local government debt and labor income share: evidence from china
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10602349/
https://www.ncbi.nlm.nih.gov/pubmed/37883481
http://dx.doi.org/10.1371/journal.pone.0293494
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