Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/216384
Authors: 
Fleisher, Belton M.
McGuire, William H.
Wang, Xiaojun
Zhao, Min Qiang
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers 13072
Abstract: 
We investigate the effect of rising labor costs on induced technological change in China's secondary industry. While previous studies have focused primarily on induced technology change in agriculture and in energy production/environmental protection, there has been little evidence relating to China's adjustments as rising labor costs affect its global competitiveness in the manufacturing sector. Building on insights developed in a rich literature, we propose a model linking changes in labor productivity to changes in labor costs, and the availability of physical capital. Importantly, we derive testable hypotheses to distinguish induced innovation from standard substitution of capital for labor under fixed technology. These hypotheses are tested using both firm- and provincial-level data. Our empirical results support the hypothesis that rising wages have induced labor-saving innovation in China, at least in the decade of the 1990s, but less so or not at all after the middle of the next decade.
Subjects: 
induced innovation
labor productivity growth
China
JEL: 
O30
D22
D24
D33
Document Type: 
Working Paper

Files in This Item:
File
Size
783.54 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.