Automation and inequality in China

In transitional economies, low wages imply sub-OECD yet growing labor shares of value added. China's rapid development has, however, seen a declining low-skill labor share and rising inequality. Here, a stylized model with three households and separable TFP and factor bias suggests a third of the decline in the low-skill share since 1994 is due to structural change and the rest mainly to skill-biased technical change. Expected future twists away...