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Are Your Labor Shares Set in Beijing? The View through the Lens of Global Value Chains

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  • Ariell Reshef
  • Gianluca Santoni

Abstract

We study the evolution of labor shares in 1995-2014 while taking into account international trade based on value added concepts. On average, the decline in labor shares (starting around 1980) accelerates in 2001-2007, after which labor shares recover somewhat. In contrast, skilled labor shares consistently increase. The acceleration in the decline in labor shares is associated with increased intensity of intermediate input exporting; this manifests in a sharp increase in the foreign component in upstreamness of industries and countries in global value chains (GVCs). China's global integration accounts for much of this. Declines in the price of investment together with capital-skill complementarity can explain both the consistent increase in skilled labor shares and the reversal of trend in overall labor shares. Compared to shares in GDP, labor shares in gross national product (GNP) are higher in countries with positive net FDI positions; the uneven spread of multinational activity contributes to greater inequality through this channel.

Suggested Citation

  • Ariell Reshef & Gianluca Santoni, 2019. "Are Your Labor Shares Set in Beijing? The View through the Lens of Global Value Chains," Working Papers 2019-16, CEPII research center.
    • Handle: RePEc:cii:cepidt:2019-16
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    3. d’Albis, Hippolyte & Boubtane, Ekrame & Coulibaly, Dramane, 2021. "Demographic changes and the labor income share," European Economic Review, Elsevier, vol. 131(C).
    4. Federico Riccio & Giovanni Dosi & Maria Enrica Virgillito, 2023. "Smile without a reason why: functional specialisation and income distribution along global value chains," LEM Papers Series 2023/31, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Panon, Ludovic, 2022. "Labor share, foreign demand and superstar exporters," Journal of International Economics, Elsevier, vol. 139(C).
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    7. Coveri, Andrea & Paglialunga, Elena & Zanfei, Antonello, 2024. "Global value chains and within-country inequality: The role of functional positioning," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 382-397.
    8. Simola, Heli, 2021. "The impact of Covid-19 on global value chains," BOFIT Policy Briefs 2/2021, Bank of Finland Institute for Emerging Economies (BOFIT).
    9. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    10. Lionel Fontagné & Ariell Reshef & Gianluca Santoni & Giulio Vannelli, 2024. "Automation, global value chains and functional specialization," Review of International Economics, Wiley Blackwell, vol. 32(2), pages 662-691, May.
    11. Fontagné, Lionel & Santoni, Gianluca, 2021. "GVCs and the endogenous geography of RTAs," European Economic Review, Elsevier, vol. 132(C).
    12. Yang, Yichen & Liu, Wen, 2024. "Free trade agreements and domestic value added in exports: An analysis from the network perspective," Economic Modelling, Elsevier, vol. 132(C).
    13. Federico Riccio & Lorenzo Cresti & Maria Enrica Virgillito, 2025. "The labour share along global value chains: perspectives and evidence from sectoral interdependence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 161(2), pages 635-684, May.
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    15. González-Rozada, Martín & Ruffo, Hernán, 2024. "Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries," World Development, Elsevier, vol. 177(C).
    16. Bellocchi, Alessandro & Saraceno, Francesco & Travaglini, Giuseppe, 2025. "Closing the productivity–wage gap in the European Union: The role of the labor share," Structural Change and Economic Dynamics, Elsevier, vol. 75(C), pages 689-702.
    17. Andrea Coveri & Elena Paglialunga & Antonello Zanfei, 2023. "Global value chains, functional diversification and within-country inequality: an empirical assessment," Working Papers 2302, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2023.
    18. Guschanski, Alexander & Onaran, Özlem, 2021. "The effect of global value chain participation on the labour share – Industry level evidence from emerging economies," Greenwich Papers in Political Economy 31973, University of Greenwich, Greenwich Political Economy Research Centre.
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    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J00 - Labor and Demographic Economics - - General - - - General

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