From China with love: Effects of the Chinese economy on skill-biased technical change in the US

Angus Chu, Guido Cozzi and Yuichi Furukawa

MPRA Paper from University Library of Munich, Germany

Abstract: 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)
Date: 2012-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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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)

Related works:
Journal Article: Effects of Economic Development in China on Skill-Biased Technical Change in the US (2015)
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