Implications of GDP accounting for factor income share in China

•Changes in GDP accounting approach by the NBS may influence the measurement of factor income share.•Industry classification and change in value-added measure may cause artifact change in factor income share.•Adjustments in the acounting of net interest payment and multi-industry activities contaminated factor income share in 2004 and 2008.•Adjustment in the accounting of individual economy in 2008 caused labor share to increase 3-4.2 percentage points.

This paper investigates changes in GDP accounting in China that may cause movement in factor income share from three aspects: industry reclassification, value-added measure, and the accounting method of income components at institutional unit level. Particularly, this paper discusses the impacts on factor income share caused by the accounting of net interest payment and multi-industry businesses for enterprises, and the accounting of income components in individual economy. As a quantitative assessment, accounting method change in individual economy has caused the aggregate labor share of income to increase by 3-4.2 percentage points from 2007 to 2009.