Chu, Angus C. and Cozzi, Guido and Furukawa, Yuichi (2012): From China with love: Effects of the Chinese economy on skill-biased technical change in the US.
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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.
|Item Type:||MPRA Paper|
|Original Title:||From China with love: Effects of the Chinese economy on skill-biased technical change in the US|
|Keywords:||economic growth; skill-biased technical change; offshoring|
|Subjects:||F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences; Diffusion Processes
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
|Depositing User:||Angus C. Chu|
|Date Deposited:||08. Aug 2012 11:58|
|Last Modified:||14. Feb 2013 12:41|
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