scholarly journals Financial Constraints, Corporate Savings and Labor Income Share—Based on China’s Economic Transition

2021 ◽  
Vol 14 (1) ◽  
pp. 346
Author(s):  
Jing Ma ◽  
Qiuyun Zhao ◽  
Qing Li ◽  
Hao Yang
Keyword(s):  
Financial Constraints ◽  
Economic Transition ◽  
Negative Relationship ◽  
Economic Transformation ◽  
Labor Income ◽  
Firm Level ◽  
Income Share ◽  
Industrial Enterprises ◽  
Savings Rate ◽  
China’S Economy

What causes are responsible for China’s declining labor income share? We investigate this phenomenon in depth from the standpoint of financial constraints. By summarizing the stylized facts of China’s economy, this paper demonstrates that as China’s economy transforms, the financial market’s imperfections lead to more efficient (non-state-owned) enterprises inclined to use corporate savings for the purpose of “crowding out” workers’ remuneration for endogenous financing, resulting in a rising savings rate and a declining share of labor income. On this foundation, we construct a more general theoretical model regarding China’s economic transformation, propose research propositions, and conduct an empirical study utilizing the Chinese Industrial Enterprises Database from 1999 to 2007. The findings show a strong negative relationship between the financial market imperfections and the labor income share, with a 1% increase in financial constraints reducing labor income share by 0.051%. The rise in savings as a result of the financial restrictions works as a mediator variable in this process. Furthermore, our prediction for the path of the labor income share suggests that China’s savings rate would decline after reaching its peak, while the labor income share will bottom out and rebound by the end of the country’s economic transition. This study uses firm-level micro-data to reveal the internal mechanism of financial constraints lowering labor income share, which is a useful supplement to the existing literature. It also provides empirical evidence and policy options for developing countries to reform their financial systems and increase labor income share in the pursuit of sustainable development.

scholarly journals Financial constraint, trust, and export performances: firm-level evidence from Africa

2021 ◽  
pp. 1-23
Author(s):  
Maty Konte ◽  
Gideon Ndubuisi
Keyword(s):  
Financial Constraints ◽  
Interpersonal Trust ◽  
Negative Relationship ◽  
Financial Constraint ◽  
African Countries ◽  
Firm Level ◽  
Country Level ◽  
The World Bank ◽  
Negative Effect ◽  
Enterprise Surveys

Abstract Several existing studies have documented a negative relationship between firm financial constraint and export activities but do not attempt to examine factors that could attenuate this relationship in Africa. In this paper, we examine the effect of financial constraint on exports in Africa and explore how the level of trust in countries where firms are located shapes this relationship. We combine the World Bank Enterprise Surveys with different measures of country-level personal and interpersonal trust computed from the Afrobarometer surveys of 19 African countries. Our results show that financial constraints negatively affect export activities. However, this negative effect is attenuated for firms that are located in trust-intensive societies. These findings are robust to different specifications. Interestingly, we find that small and medium-sized enterprises in Africa are more likely to be affected by financial constraints but also more likely to benefit from a higher level of both personal and interpersonal trust, while for larger firms only interpersonal trust matters.

scholarly journals Financial Constraints, Trade Mode Transition, and Global Value Chain Upgrading of Chinese Firms

2019 ◽  
Vol 11 (17) ◽  
pp. 4527 ◽  
Author(s):  
Lin Chen ◽  
Sumei Luo ◽  
Tian Zhao
Keyword(s):  
Value Chain ◽  
Financial Constraints ◽  
Empirical Studies ◽  
Value Added ◽  
Economic Transformation ◽  
Global Value Chain ◽  
Firm Level ◽  
Chinese Enterprises ◽  
Chinese Banks ◽  
Level Production

China is facing the serious problem of ‘low-end locking’ in the global value chain as it becomes deeply integrated into world trade. Deciphering how to upgrade Chinese enterprises’ positions in the global value chain is crucial to China’s economic transformation and sustainable development. This study explores the feasibility of upgrading China’s global value chain from the perspective of financial constraints. Based on a theoretical framework, this study applies firm-level production data and trade data, using a documented method of measuring domestic value added at the firm level. Besides, we apply three methods to comprehensively measure the financial constraints faced by enterprises. In our study, we verify the findings of previous empirical studies that reducing financial constraints can significantly increase enterprises’ domestic value added, and this conclusion remains valid after considering various robustness tests. Our heterogeneity analysis indicates that easing financial constraints can significantly contribute to Chinese private enterprises’ upgrade in the global value chain, which could be related with “ownership discrimination” of Chinese banks. Finally, this study analyses the two mechanisms by which relaxing financial constraints could promote global value chain upgrading: (i) directly transfer enterprises’ trade mode from processing trade to general trade and (ii) allowing enterprises to climb up in the global value chain.

Political embeddedness and multi-layered interaction effects on the performance of private enterprises: lessons from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Eli Gimmon ◽  
Ying Teng ◽  
Xiaobin He
Keyword(s):  
Transition Economy ◽  
Economic Transition ◽  
Secondary Data ◽  
Interaction Effects ◽  
Positive Influence ◽  
Business Owners ◽  
Private Enterprises ◽  
Firm Level ◽  
Content Type ◽  
Personal Level

Purpose This study aims to present multi-layered embeddedness and explore the main and interaction effects of political embeddedness on the performance of private enterprises in China. This study tests multi-layered embeddedness through interaction effects between three layers, namely, political, territorial and inter-firm embeddedness. Political embeddedness is related at the personal and the firm levels. Design/methodology/approach The authors used secondary data of four non-panel waves (2002, 2008, 2010 and 2016) of large samples having identical questions based on the Chinese private enterprises’ survey. The accumulated number of business owners’ responses is a total of 10,686. Findings The main effects of each of the layers of embeddedness showed a positive influence on enterprise performance consistently and unchanged over time which fits the Chinese Guanxi regardless of the immense macro-economic transition. However, unexpectedly some interactions showed negative significant effects on performance. Practical implications First, business owners should be aware of the specific contribution to the performance of political embeddedness at both the firm level and the personal level. Second, the pursuit of exercising simultaneously several layers of embeddedness may be detrimental to company performance. This study provides generalizable lessons regarding different embeddedness layers beyond the context of China’s transition economy. Originality/value First, the authors extend political embeddedness to the firm level whilst in previous research this construct had been mostly related to the personal level. Second, building on the resource-based view and redundant resources the authors present the disadvantage of “over-embeddedness” as related to multi-layered embeddedness which has been understudied.

scholarly journals Capital Labor Substitution, Structural Change, and the Labor Income Share

2014 ◽  
Author(s):  
Francisco Alvarez-Cuadrado ◽  
Ngo Van Long ◽  
Markus Poschke
Keyword(s):  
Structural Change ◽  
Labor Income ◽  
Income Share
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