Capital Structure and Natural Rate of Unemployment：An Empirical analysis.doc

1、1Capital Structure and Natural Rate of Unemployment：An Empirical analysisAbstract. The model based on Marxism economics such as capital structure 、capital deposit and capital cycles measure directly natural rate of the unemployment. The natural rate of unemployment is decided by the capital per work

2、er, capital structure and average wage. According to the model the natural rate of the unemployment is empirical from 1991 to 2009.the result shows that the ascendant trend is very obvious. At last, according to the model, adjusting economic structure and regulating income distribution can reduce na

3、tural rate of unemployment. Key words: Natural rate of unemployment, capital structure, capital per worker The model of the natural rate of unemployment is based on Marxism economic theories. Accoding to this model, Chinese natural rate of unemployment from 1991 to 2009 is measured. The results of m

4、easurement show that specific natural rate of unemployment per year is different from that calculated by pure statistical model, but the results of two calculation methods 2have the same uplifted fluctuant trend. 1. Mechanism and econometric model of Natural rate of unemployment When labor market re

5、aches balance in the quantity and structure, there is still surplus labor. Rate of unemployment calculated from this surplus labor is called natural rate of unemployment. It is objective existence in the process of economic development. 1.1 Mechanism of natural rate of unemployment With the developm

6、ent of economic and growing accumulation of capital, new technology seeps into real economy more quickly; as a result, it alters the constitution of aggregate social capital. The level of technology decides the ratio between the means of production and labor in the aggregate social capital. Value of

7、 the means of production is represented by C called constant capital and value of the labor force is represented by V called alterable capital. The ratio of constant capital and alterable capital is known as organic structure of capital. With the development of the capital accumulation, constant cap

8、ital and alterable capital increase according to a certain percentage. Technological advance becomes normalization with the social 3economic development. As a result of technological advancement, the organic structure of capital gradually improves. The increment in aggregate social capital is allott

9、ed more to constant capital than to alterable capital, namely, the labor requirements coming from the incremental social capital lessen relative to organic structure of capital remaining unchanged .Labor quantity demanded will increase with deceleration, then increased employment is less than it org

10、anic structure of capital remains constant. If organic structure of capital improves, original capital will exclude labor. Then labor quantity demanded will absolutely decrease. In terms of labor supply, more and more women join the labor market, because complicated and physical labor demanded by ca

11、pital decrease due to new technique extensively used in production. Development of economic and increasing in aggregate social capital must incur the industrialization. In the process of industrialization, the young handicraftsman and small producers split up. Most of them become wage earner, as fol

12、low, the supply of labor increases. Competition is normalization in market economy, and it brings some small and medium-sized enterprises to bankruptcy. Bankrupt small owners become wage earner for living, thus it increase the supply of the labor. 4Many children have grown up every year, and they se

13、arch for job on labor market. On the whole, the supply of the labor will rise with the development of the capital accumulation and technological progress. Improving on organic structure of original capital results that demand of labor absolutely decrease, and improving on organic structure of increm

14、ent capital induces the demand of labor relatively decreased; that is to say, extra demand of labor have diminishing trend .The extra demand of labor diminish, else the supply of labor increases. Relatively surplus population emerges as a result of the supply of labor exceeding the demand. Relativel

15、y surplus population is necessary consequence of economic development, and it exists objectively in economy. The rate of unemployment calculated by relatively surplus population is called natural rate of unemployment. 1.2 The model of natural rate of unemployment 1-2-1 relationship between capital a

16、nd employment Any productions base on their own technique, labor, and organization and so on. The more advanced the technology and the organization is, the more economic independence the labor loses. The labor becomes the subsidiary of the machine. In the 5whole production process, labor does not co

17、ntrol machine, but machine dominate over the labor. The workers who get away machine, factory and capital lose the independent ability to production activity; as a result, they cant live without capital. Therefore, in the play games between labor and capital, the capital has become dominant. The soc

18、ial capital stocks decide the total quantity of labor demanded. The level of technology contained in capital decides the skill that worker must grasp. Allocation of social capital among social sections decides the flows and quantity of labor among social sections. In analyzing the natural rate of un

19、employment, therefore, its critical to begin with the social capital stock. 1-2-2 Relationship between social capital stock and employment Let c/v be an average composition of social capital over a period of time. Then the proportion of capital purchasing labor force to social capital is v/(v+c). Le

20、t K be the stock of social capital over a period of time. Then the corresponding capital purchasing labor force is Kv/(v+c). Let w be the average social wage. Then the natural employment of labor force is Kv/(v+c)w. Let N be the total number of economic population. Then the natural rate of unemploym

21、ent, denoted by U* is : where k is the capital per head. 6Viewed from (3), natural rate of unemployment varies inversely with capital per head and is directly proportional to average wage. This conclusion chimes in with theory of efficiency wage. Natural rate of unemployment varies directly with ave

22、rage composition of social capital. The natural rate of unemployment has nothing to do with inflation. This conclusion is in consonance with the opinion composed by Phelps(1967).At last, variation of natural rate of unemployment is the result of all variants. 2. Empirical analysis on natural rate of

23、 unemployment 2.1 Capital per head 2-1-1-1 Social capital stock The social capital stock computed by perpetual inventory approach at the time of t is : Where Kt and Kt-1 are the capital stock equal to time t and time t-1; ?驻 Kt is extra capital at the time of t; It and St are equal to extra fixed as

24、set stock and extra storage at time t. Let K0 be capital stock in base period, then 2-1-1-2 Capital stock in base period Social capital is the sum of private capital interrelating and interdependent, and the movement of the social capital is the total movement of private capital .The movement of pri

25、vate 7capital presents the three forms of function, namely monetary capital, production capital and commodity capital. The coexistence and subsequence of three functional capitals ensure continuous movement of the private capital. As such, there are three forms of functional capital in the process o

26、f social capital movement, and it appears the feature of coexistence and subsequence the movement process of social capital is: Where W is the commodity capital; G is monetary capital; P is the production capital. The total of social capital a certain time is equal to the sum of commodity capital, p

27、roduction capital and monetary capital. Monetary capital W, namely, the value of the aggregate social product is approximately equal to GDP, so it can be expressed by GDP. The monetary capital(G) eliminating the value of consumption goods translate into the production capital, therefore the quantity

28、 of the production capital is approximately equal to the GDP minus the total amount of consumable retail denoting by W1.so K0=3*GDP-W1. The subject consumer of consumption goods contains the civil resident(R),government(G) and abroad consumer(NX),therefore the total expenditure in consumption of the

29、se subject denotes the total consumption goods, then K0=3*GDP-(R+G+NX) 2-1-1-3 8capital per head k= Kt / Nt, where Kt and Nt denotes social capital stock and the number of economic population respectively at time t. 2-1-2 composition of social capital From the movement process of social capital, we

30、know that: at the time of t, the relationship among variants is : Where Ct, GDP, R, G, NX denote the value of production means, gross domestic product, residential consumption, expenditure of government, net export respectively. The value of labor force(Vt) at time it can be behavior of the gross sa

31、lary(w),then composition of social capital is Ct / Vt=(GDP- R-G-NX)/w. 2-1-3 average wage Average wage of urban resident is on behalf of average wage in model of natural rate of unemployment. 2.2 Calculation results of natural rate of unemployment and analysis on it 2-2-1 Calculation results of natu

32、ral rate of unemployment Table 1 shows that the natural rate of unemployment from 1991 to 2009, and 1991 is base year. All variables such as capital per head, composition of capital and average wage are computed by the data coming from china statistic yearbook of 92010. 2-2-3 Analysis on natural rat

33、e of unemployment The nature rate of unemployment as whole ascends from 1991 to 1994, and the economy of the same time is in the state of consolidation, halt and digestion .From 1994 to 1997,the economy takes a turn for the better, and natural rate of unemployment descends continually and rapidly. F

34、rom 1997 to 2009, the natural rate of unemployment rises again. The natural rate of unemployment is relatively steady after 2004, but until 2008, because of the effects of financial crises, the natural rate of unemployment rises to records. Labor-intensive enterprises in coastal areas, export-orient

35、ed enterprises in the crisis are worst hit, and many o f them are bankrupt. As a result, natural rate of employment rises highly. The natural rate of unemployment as whole presents the trend of fluctuating escalation, which is consonance with the research conclusion of Caifangs(2004)and Zheng xiang

36、quans(2006). Firstly, the fluctuant ascendance of the natural rate has to do with average composition of social capital. Alteration in average composition of social capital is the result of the industrial structure adjustment. Industrialization leads the share of the primary industry to decrease and

37、 the proportion of 10the secondary industry increase, whereas the capital structure of the secondary industry is larger than that of the primary industry. The feature of industrialization results in the rising of the average compassion of social capital. Industrial structure adjustment directly resu

38、lt in ascend of natural rate of unemployment, meanwhile it raises new requirement in the structure and quality of labor force. If existing labor force cant satisfy the new demand, structural unemployment and frictional unemployment appear and actual unemployment grows in intensity. Secondly, the flu

39、ctuant ascendance of the natural rate of unemployment has to do with improving in average wage. Wage is the market price of the labor commodity. According to demand law, price rises and demand decreases. The rising in wage reduces the demand of labor force which improves the natural rate of unemploy

40、ment. The table 1 shows an up trend of average wage. The up trend of average wage induces the rise in natural rate of unemployment. In real movement of economy, in order to encourage operators, many manufactures implement efficiency wage. Extra wage raise the cost of quit and make employee work hard, and then capital can get more amount of labor, therefore the amount of employment reduces more and increases the natural rate of unemployment.