Did capital replace labor? New evidence from offshoring

Paul Moon Sub Choi, Kee Beom Kim, Jinyoung Seo

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Article number20180079
JournalB.E. Journal of Macroeconomics
Volume19
Issue number1
DOIs
StatePublished - 2019

Keywords

  • job polarization
  • labor income share
  • morishima elasticity of substitution
  • offshoring
  • technological changes

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