Automation and Inequality in China

47 Pages Posted: 15 Sep 2017

See all articles by Yixiao Zhou

Yixiao Zhou

Australian National University (ANU) - Crawford School of Public Policy

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Date Written: September 13, 2017

Abstract

In transitional economies like China, comparatively low real wages imply sub-OECD labor and skill shares of value added and comparatively high capital shares. Despite rapid real wage growth, however, rather than converge toward the OECD, China’s low-skill labor share has been falling, due to structural and technical change. Here this dependence is quantified using an elemental national model with three households. Since 1994, a third of the total change in the Gini coefficient is estimated to be due to structural change and the rest to mainly skill-biased technical change. Widely anticipated further twists away from low-skill labor toward capital are then examined, assuming downward rigidity of low-skill wages and transfers that sustain low-skill welfare via taxes on capital income. The potential is identified for unemployment to rise extraordinarily, with negative effects mitigated if the population declines or if the share twists are accompanied by very strong total factor productivity growth.

Keywords: Automation, income distribution, tax, transfers, general equilibrium, China

JEL Classification: D33, D58, O33, O53

Suggested Citation

Zhou, Yixiao and Tyers, Rod, Automation and Inequality in China (September 13, 2017). CAMA Working Paper No. 59/2017, Available at SSRN: https://ssrn.com/abstract=3036735 or http://dx.doi.org/10.2139/ssrn.3036735

Yixiao Zhou

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

Arndt Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia
61-6-249-5124 (Fax)

The University of Western Australia - Department of Economics ( email )

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Crawley, Western Australia 6009
Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

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