Abstract
Neoclassical theory explains the global decline of the labor income share by capital-labor substitution due to the affordable relative price of capital. Based on the Morishima elasticities of substitution among capital, labor disaggregated into high-, medium-, and low-skill groups, and imported and domestic intermediate inputs, offshoring appears to disproportionately affect job polarization globally and in developed economies. These findings in favor of the globalization hypothesis are buttressed by multivariate panel regressions. Lastly, offshoring might reinforce technological changes, a double-edged sword that can boost productivity growth but exacerbate wage inequality.
Acknowledgements
Special thanks are due to Tiago Cavalcanti (the Editor) and an anonymous referee. We also thank Seungwoo Chin, Joung Hwa Choi, Chune Young Chung, Jinook Jeong, Tae-Hwan Kim, Dong Cheon Shin, Jay Min Lee, Byung Sam Yoo and the participants of Western Economic Association 2015 (Honolulu, Hawaii). This research is based on Seo’s (2016) M.A. thesis approved at Yonsei University. This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2018S1A5A2A01029148). Standard disclaimer rules apply and all errors are of our own.
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Articles in the same Issue
- Frontiers
- The Precautionary Saving Effect of Government Consumption
- Advanced
- Optimal taxation under equilibrium unemployment and economic profits
- Labor supply, income distribution, and tax progressivity in a search model
- Housing market and labor market search
- Rented vs. owner-occupied housing and monetary policy
- On the cyclicality of real wages and wage differentials
- Aggregate implications of occupational inheritance in China and India
- Barriers to firm growth in open economies
- The role of IPRs on prices, wages and growth in a two country directed technical change model
- Fiscal counter-cyclicality and productive investment: evidence from advanced economies
- Contributions
- Is risk shock a key factor driving business cycles in China?
- Did capital replace labor? New evidence from offshoring
- International capital mobility and structural transformation
- Redistributive policies and technology diffusion
Articles in the same Issue
- Frontiers
- The Precautionary Saving Effect of Government Consumption
- Advanced
- Optimal taxation under equilibrium unemployment and economic profits
- Labor supply, income distribution, and tax progressivity in a search model
- Housing market and labor market search
- Rented vs. owner-occupied housing and monetary policy
- On the cyclicality of real wages and wage differentials
- Aggregate implications of occupational inheritance in China and India
- Barriers to firm growth in open economies
- The role of IPRs on prices, wages and growth in a two country directed technical change model
- Fiscal counter-cyclicality and productive investment: evidence from advanced economies
- Contributions
- Is risk shock a key factor driving business cycles in China?
- Did capital replace labor? New evidence from offshoring
- International capital mobility and structural transformation
- Redistributive policies and technology diffusion