From China with love: Effects of the Chinese economy on skill-biased technical change in the US
Guido Cozzi and
Yuichi Furukawa ()
MPRA Paper from University Library of Munich, Germany
In this study, we analyze the effects of labor shortage in China on the direction of innovation in the US by incorporating production offshoring into a North-South model of directed technical change. We �find that if offshoring is present (absent) in equilibrium, then a decrease (an increase) in unskilled labor in the South would lead to skill-biased technical change in the North. This fi�nding highlights the different implications of offshoring and conventional trade on innovation. Furthermore, we �find that an increase in the Southern stock of capital reduces offshoring and also leads to skill-biased technical change. Therefore, rapid capital accumulation and labor shortage in China could lead to a rising skill premium in the US. Calibrating the model to China-US data, we �find that a 1% decrease in unskilled labor (1% increase in capital) in China leads to a 0.8% (0.6%) increase in the skill premium in the US under a moderate elasticity of substitution between skill-intensive and labor-intensive goods.
Keywords: economic growth; skill-biased technical change; offshoring (search for similar items in EconPapers)
JEL-codes: F16 J31 O14 O33 (search for similar items in EconPapers)
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https://mpra.ub.uni-muenchen.de/40555/1/MPRA_paper_40555.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/44576/1/MPRA_paper_44576.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/52926/1/MPRA_paper_52926.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/54884/1/MPRA_paper_54884.pdf revised version (application/pdf)
Journal Article: Effects of Economic Development in China on Skill-Biased Technical Change in the US (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:40555
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