Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263765 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9835
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We study the evolution of labor shares in 1995-2014, while taking into account international trade based on value added concepts. Declines in labor shares accelerate in 2001-2007, concurrently with global value chain (GVC) integration, after which there is no trend for both. We develop a gravity-based instrument for GVC integration and find that the acceleration in the decline in labor shares is caused by increased intensity of forward GVC integration. The integration of China into GVCs has a disproportionally large effect through this mechanism. Declines in labor shares are shouldered mostly by less skilled workers in fabrication functions. Relatively capital abundant countries integrate more into forward GVCs linkages, which is associated with greater upstreamness within GVCs and increases in capital intensity. Forward GVC integration is associated with international vertical integration of both upstream intermediate input production and of offshoring of downstream assembly.
Subjects: 
labor share
global value chains
upstreamness
JEL: 
E25
F14
F15
F16
F66
J00
Document Type: 
Working Paper
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