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The B.E. Journal of Macroeconomics

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Did capital replace labor? New evidence from offshoring

Paul Moon Sub ChoiORCID iD: https://orcid.org/0000-0003-3338-4728 / Kee Beom Kim / Jinyoung SeoORCID iD: https://orcid.org/0000-0003-2152-5079
Published Online: 2018-09-28 | DOI: https://doi.org/10.1515/bejm-2018-0079


Neoclassical theory explains the global decline of the labor income share by capital-labor substitution due to the affordable relative price of capital. Based on the Morishima elasticities of substitution among capital, labor disaggregated into high-, medium-, and low-skill groups, and imported and domestic intermediate inputs, offshoring appears to disproportionately affect job polarization globally and in developed economies. These findings in favor of the globalization hypothesis are buttressed by multivariate panel regressions. Lastly, offshoring might reinforce technological changes, a double-edged sword that can boost productivity growth but exacerbate wage inequality.

Keywords: job polarization; labor income share; morishima elasticity of substitution; offshoring; technological changes

JEL Classification: D24; E22; E25; F16


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About the article

Published Online: 2018-09-28

Citation Information: The B.E. Journal of Macroeconomics, Volume 19, Issue 1, 20180079, ISSN (Online) 1935-1690, DOI: https://doi.org/10.1515/bejm-2018-0079.

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