| Abstract | Nowadays the decline of labor income shares becomes a universal phenomenon in the world, literature focuses on the effect of industrial structure in transitional economies. But the explaining power and universality is weak, when applying it to developed countries. From the view of biased technical change, this paper constructs a two-sector framework to examine the influence of biased technical change on industrial structure and factor income shares, and applies the normalized supply-side system, using three-industry data during the period of 1978-2012, to estimate the biased technical change and its effect on income shares. It shows that: the biased technical change dominates the change of industrial effect in labor shares in three industries, which shows strong explaining power in change of labor shares. Especially, the technical change in second industry is capital-biased since 1996, which is the main reason for the declining of labor share. At the same time, coupling with factor, biased technical change could induce labor mobility and the transformation of industrial structure, changing the labor income shares indirectly. |