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Did capital replace labor? New evidence from offshoring

Author

Listed:
  • Choi Paul Moon Sub

    (College of Business Administration, Ewha Womans University, 52 Ewhayeodae-gil, Seodaemun-gu, Seoul 03760, Republic of Korea)

  • Kim Kee Beom

    (International Labour Organization, 4 route des Morillons, CH-1211 Genève 22, Switzerland)

  • Seo Jinyoung

    (Department of Economics, University of California, 1118 Social Sciences and Humanities, Davis, CA 95616, USA)

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.

Suggested Citation

  • Choi Paul Moon Sub & Kim Kee Beom & Seo Jinyoung, 2019. "Did capital replace labor? New evidence from offshoring," The B.E. Journal of Macroeconomics, De Gruyter, vol. 19(1), pages 1-22, January.
    • Handle: RePEc:bpj:bejmac:v:19:y:2019:i:1:p:22:n:14
    DOI: 10.1515/bejm-2018-0079
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    References listed on IDEAS

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    More about this item

    Keywords

    job polarization; labor income share; morishima elasticity of substitution; offshoring; technological changes;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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