Does Carbon Emission Trading Affect the Share of Labor Income in Firms? Quasi-Natural Experiment Based on Carbon Emission Trading Pilot

The long-term increase of the labor share of the factors in production is the nature of the socialism, but it will also face the impact of short-term external environment changes. This paper collects the panel data of non-financial A-share listed firms from 2007 to 2019 in China, and empirically analyzes the impact of carbon emissions trading on the labor income share of firms using the difference-in-difference method, and then conducts the analysis of heterogeneity and mechanism of impacts. The results show that the carbon emission trading significantly reduces the share of labor income of enterprises. The impacts are different among different types of enterprises, where the labor income share is reduced in enterprises with low-carbon emission, as well as in state-owned and small or medium-sized enterprises, while those of the high-carbon emission enterprises are improved significantly. The mechanism study further finds that the carbon emission trading impact negatively the share of labor income mainly through reducing their wage rate, but another potential mechanism, labor productivity, is not significant.