Technological Changes, Offshoring, and the Labor Share
Author | : Weicheng Lian |
Publisher | : International Monetary Fund |
Total Pages | : 57 |
Release | : 2019-07-02 |
ISBN-10 | : 9781498325615 |
ISBN-13 | : 1498325610 |
Rating | : 4/5 (15 Downloads) |
Download or read book Technological Changes, Offshoring, and the Labor Share written by Weicheng Lian and published by International Monetary Fund. This book was released on 2019-07-02 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Existing studies on the downward trend in the labor share of income mostly focus on changes within individual countries. I document, however, that half of the global decline in the labor share of income can be traced to the relocation of activities between countries. I develop a two-country model to show that when the relative price of investment goods falls, production activities with a small elasticity of substitution between capital and labor tend to get offshored from high- to low-wage countries. The model provides an explanation as to why such relocation may drive the labor share down in both developed and developing economies, as well as globally.