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Automation and Inequality in China

Author

Listed:
  • Yixiao Zhou
  • Rod Tyers

Abstract

In transitional economies like China, comparatively low real wages imply sub-OECD labor and skill shares of value added and comparatively high capital shares. Despite rapid real wage growth, however, rather than converge toward the OECD, China’s low-skill labor share has been falling, due to structural and technical change. Here this dependence is quantified using an elemental national model with three households. Since 1994, a third of the total change in the Gini coefficient is estimated to be due to structural change and the rest to mainly skill-biased technical change. Widely anticipated further twists away from low-skill labor toward capital are then examined, assuming downward rigidity of low-skill wages and transfers that sustain low-skill welfare via taxes on capital income. The potential is identified for unemployment to rise extraordinarily, with negative effects mitigated if the population declines or if the share twists are accompanied by very strong total factor productivity growth.

Suggested Citation

  • Yixiao Zhou & Rod Tyers, 2017. "Automation and Inequality in China," CAMA Working Papers 2017-59, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2017-59
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    Cited by:

    1. Scott Rozelle & Yiran Xia & Dimitris Friesen & Bronson Vanderjack & Nourya Cohen, 2020. "Correction to: Moving Beyond Lewis: Employment and Wage Trends in China’s High- and Low-Skilled Industries and the Emergence of an Era of Polarization," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(4), pages 774-775, December.
    2. Rod Tyers & Yixiao Zhou, 2023. "Automation and inequality with taxes and transfers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(1), pages 68-100, February.
    3. Li, Xun & Hui, Eddie Chi-man & Lang, Wei & Zheng, Shali & Qin, Xiaozhen, 2020. "Transition from factor-driven to innovation-driven urbanization in China: A study of manufacturing industry automation in Dongguan City," China Economic Review, Elsevier, vol. 59(C).
    4. Liu, Yunxin & Cao, Yuqiang & Lu, Meiting & Shan, Yaowen & Xu, Jiangang, 2024. "Automating efficiency: The impact of industrial robots on labor investment in China," Economic Modelling, Elsevier, vol. 140(C).
    5. Zhang, Jingting & Shi, Zhiru, 2025. "Suppress or let go? The time-varying roles of automation towards labor market," Structural Change and Economic Dynamics, Elsevier, vol. 74(C), pages 158-174.
    6. Jiang, Hong & Wang, Xue & Liu, Chongguang, 2024. "Automated machines and the labor wage gap," Technological Forecasting and Social Change, Elsevier, vol. 206(C).
    7. Yingying Lu & Yixiao Zhou, 2021. "A review on the economics of artificial intelligence," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1045-1072, September.
    8. Rod Tyers & Yixiao Zhou, 2020. "US–China rivalry: The macro policy choices," The World Economy, Wiley Blackwell, vol. 43(9), pages 2286-2314, September.
    9. Zhang, Xinchun & Sun, Murong & Liu, Jianxu & Xu, Aijia, 2024. "The nexus between industrial robot and employment in China: The effects of technology substitution and technology creation," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    10. Grace Taylor & Rod Tyers, 2017. "Secular Stagnation: Determinants and Consequences for Australia," The Economic Record, The Economic Society of Australia, vol. 93(303), pages 615-650, December.
    11. Li, Shiyuan & Li, Yumin, 2021. "The Impact of Mobile Phone Adoption on Income Inequality," MPRA Paper 110969, University Library of Munich, Germany.
    12. Li, Jianqiang & Shan, Yaowen & Tian, Gary & Hao, Xiangchao, 2020. "Labor cost, government intervention, and corporate innovation: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 64(C).
    13. Yixiao Zhou, 2021. "The Economics of Artificial Intelligence," The Economic Record, The Economic Society of Australia, vol. 97(319), pages 577-580, December.
    14. Zhonghao Zhang & Shimeng Sun & Wanzhen Chen & Xuesong He, 2023. "Spatiotemporal patterns in China's Minimal Living allowances: The urban‐rural gap and regional differences revealed through a national poverty alleviation program," Growth and Change, Wiley Blackwell, vol. 54(1), pages 214-233, March.
    15. Zhou, Huilin & Wang, Linhui & Cao, Yutong & Li, Jincheng, 2025. "The impact of artificial intelligence on labor market: A study based on bibliometric analysis," Journal of Asian Economics, Elsevier, vol. 98(C).
    16. Wright, Scott A. & Schultz, Ainslie E., 2018. "The rising tide of artificial intelligence and business automation: Developing an ethical framework," Business Horizons, Elsevier, vol. 61(6), pages 823-832.

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    Keywords

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    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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