Technological Changes, Offshoring, and the Labor Share

Author/Editor:

Weicheng Lian

Publication Date:

July 2, 2019

Electronic Access:

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Summary:

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.

Series:

Working Paper No. 19/142

Subject:

English

Publication Date:

July 2, 2019

ISBN/ISSN:

9781498316811/1018-5941

Stock No:

WPIEA2019142

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

57

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