Structural Transformation, Factor Income Distribution and Common Prosperity

This study examines the impact of structural transformation on income distribution patterns across production factors from both theoretical and empirical perspectives, providing insights for global efforts to optimize industrial structures, narrow income disparities, and achieve dual objectives of efficiency and equity. The research uncovers a cross-national phenomenon where “declining in industrial share exacerbates income inequality”, offering theoretical mechanisms and empirical evidences to explain this trend. It demonstrates that the decline in the industrial share involves two concurrent processes: the contraction of non-skill-intensive industries and the expansion of skill-intensive services, as well as the contraction of labor-intensive industries and the expansion of capital-intensive services. These changes alter production factor demand structures while increasing skill premiums and capital income shares, thereby worsening income distribution patterns and intensifying structural employment contradictions.