Does the Exposure to Routinization Explain the Evolution of the Labor Share of Income? Evidence from Asia

  • Mitali DasEmail author
Part of the ADB Institute Series on Development Economics book series (ADBISDE)


This paper analyzes the evolution of the labor share of income in Asia, a region where countries have experienced steep declines and increases as well as stable labor income shares in the quarter-century since 1990. An innovation of this study is to expand the standard drivers of labor shares—technological advance, trade, institutions, and policies—by considering whether the exposure to routine jobs has also played a role in the evolution of the labor share of income. The more exposed a country is to routinization, the greater is the probability that ICT capital substitutes mid-skilled jobs, lowering the overall wage share of workers. Using a new dataset on the exposure to routinization, the study finds that it is an important determinant of the evolution of labor shares in developed Asian economies, where the initial exposure was high, but not in developing Asian economies where the share of routine jobs was small.

JEL Classification

C23 E24 E25 O33 


  1. Acemoglu, D., & Autor, D. H. (2011). Skill, tasks and technologies: Implications for employment and earnings. In Ashenfelter O., & Card D. (Eds.), Handbook of labor economics (Vol. 4, pp. 1043–1171). Elsevier: Amsterdam.Google Scholar
  2. Asian Development Bank. (2014). Inequality in Asia and the Pacific: Trends, Drivers, and Policy Implications. London and New York: Asian Development Bank and Routledge Publications.Google Scholar
  3. Autor, D. H., & Dorn, D. (2013). The growth of low-skill service jobs and the polarization of the US labor market. American Economic Review, 103(5), 1553–1597.CrossRefGoogle Scholar
  4. Autor, D. H., Levy, F., & Murnane, R. (2003). Computer-based technological change and skill demands: Reconciling the perspectives of economists and sociologists. In Appelbaum E., Bernhardt A., & Murnane R. J. (Eds.), Low-Wage America: How Employers Are Reshaping Opportunity in the Workplace (pp. 121–154). New York: Russell Sage Foundation.Google Scholar
  5. Beaudry, P., Green, D., & Sand, B.M. (2016). The great reversal in the demand for skill and cognitive tasks. Journal of Labor Economics, 34(S1) (Part 2, January) S199–247.Google Scholar
  6. Bergin, P. R., Feenstra, R. C., & Hanson, G. H. (2007). Outsourcing and volatility. NBER Working Papers 13144, National Bureau of Economic Research.Google Scholar
  7. Blanchard, O. J. (1997). The medium run. Brookings Papers on Economic Activity, 2, 89–158.CrossRefGoogle Scholar
  8. Blinder, A. S. (2007, March). How many US jobs might be offshorable? CEPS Working Paper No. 142. Princeton University.Google Scholar
  9. Blinder, A., & Krueger, A. (2013). Alternative measures of offshorability: A survey approach. Journal of Labor Economics, University of Chicago Press, 31(S1), S97–128.Google Scholar
  10. Hsieh, C., & Klenow, P. (2003). Relative prices and relative prosperity. Proceedings, Federal Reserve Bank of San Francisco.Google Scholar
  11. Comin, D., & Mestiere, M. (2013). If technology has arrived everywhere, why has income diverged?” Working Paper, Harvard Business School, Boston.Google Scholar
  12. Dao, M. C., Das, M., Koczan, Z., & Lian, W. (2017). Why is labor receiving a smaller share of global income? Theory and empirical evidence. IMF Working Paper. Washington, DC.Google Scholar
  13. Das, M. (2018). Automation and job displacement in emerging markets: New evidence. Retrieved form
  14. Das, M., Hilgenstock, B. (2018). The Exposure to Routinization: Labor Market Implications in developed and developing economies. IMF Working Paper. Washington, DC.
  15. Elsby, M. W. L., Hobijn, B., & Şahin, A. (2013). The decline of the US labor share. Brookings Papers on Economic Activity, 2, 1–63.CrossRefGoogle Scholar
  16. Feenstra, R. C. (2002). Border effects and the gravity equation: Consistent methods for estimation. Scottish Journal of Political Economy, Scottish Economic Society, 49(5), 491–506.CrossRefGoogle Scholar
  17. Feenstra, R. C. (2007). Globalization and its impact on labor. In Presented as the global economy lecture. Vienna institute for international economics studies.Google Scholar
  18. Feenstra, R. C., & Hanson, G. H. (1996). Globalization, outsourcing, and wage inequality. American Economic Review, American Economic Association, 86(2), 240–245.Google Scholar
  19. Feenstra, R. C., & Hanson, G. H. (1997). Foreign direct investment and relative wages: Evidence from Mexico’s maquiladoras. Journal of International Economics, 42, 371–393.CrossRefGoogle Scholar
  20. Feenstra, R. C., & Hanson, G. H. (1999). The impact of outsourcing and high-technology capital on wages: Estimates for the United States, 1979–1990. Quarterly Journal of Economics, 114(3), 907–940.CrossRefGoogle Scholar
  21. Firpo, S., Fortin, N. M., & Lemieux, T. (2011). Occupational tasks and changes in the wage structure. IZA Working Paper Series. Bonn, Germany.Google Scholar
  22. Foster, A., & Rosenzweig, M. (1995). Learning by doing and learning from others: Human capital and technical change in agriculture. Journal of Political Economy, 103, 1176–1209.CrossRefGoogle Scholar
  23. Goos, M., Manning, A., & Salomons, A. (2014). Explaining job polarization: Routine-biased technological change and offshoring. American Economic Review, 104(8), 2509–2526.CrossRefGoogle Scholar
  24. Grossman, G. M., & Rossi-Hansberg, E. (2008). Trading tasks: A simple theory of offshoring. American Economic Review, 98(5), 1978–1997.CrossRefGoogle Scholar
  25. Harrison, A. (2005). Has globalization eroded labor’s share? Some cross-country evidence. Retrieved from
  26. Hsieh, C.-T., & Klenow, P. J. (2007). Relative prices and relative prosperity. American Economic Review, 97, 562–585.CrossRefGoogle Scholar
  27. Ikenaga, T., & Kamibayashi, R. (2016). Task polarization in the Japanese labor market: Evidence of a long-term trend. Industrial Relations, 55, 267–293.Google Scholar
  28. IMF. (2007). How has the globalization of labor affected the labor income share in advanced countries? IMF Working Paper 07/298. Washington, DC: International Monetary Fund.Google Scholar
  29. Jaumotte, F., Lall, S., & Papageorgiou, C. (2013). Rising income inequality: Technology, or trade and financial globalization? IMF Economic Review, 61(2), 271–309.CrossRefGoogle Scholar
  30. Karabarbounis, L., & Neiman, B. (2014). The global decline of the labor share. Quarterly Journal of Economics, 129, 61–103.Google Scholar
  31. Katz, L., & Murphy, K. (1992). Changes in relative wages, 1963–1987: Supply and demand factors. Quarterly Journal of Economics, 107(1), 35–78.CrossRefGoogle Scholar
  32. Katz, L. F., & Krueger, A. B. (1998) Computing Inequality: Have computers changed the labor market? Quarterly Journal of Economics 113(4), 1169–1213.Google Scholar
  33. Koopman, R., Wang, Z., & Wei, S.-J. (2014). Tracing value-added and double counting in gross exports. American Economic Review, 104(2), 459–494.CrossRefGoogle Scholar
  34. Krusell, P. (1998). Investment-specific R and D and the decline in the relative price of capital. Journal of Economic Growth, 3(2), 131–141.CrossRefGoogle Scholar
  35. Kurlantzick, A. (2017). Asia’s rising populists could be more dangerous to democracy than the set. World Politics Review 1–18.Google Scholar
  36. Levy, F., & Murnane, R. (1996). With what skills are computers a complement? American Economic Review, 86, 258–262.Google Scholar
  37. Maloney, W., & Molina, C. (2016). Are automation and trade polarizing developing country labor markets, too? Policy Research Working Paper 7922. Washington, DC: World Bank.Google Scholar
  38. Nordhaus, W. (2007). Two centuries of productivity growth in computing. Journal of Economic History, 67, 128–159.CrossRefGoogle Scholar
  39. Whelan, K. (2000). Balanced growth revisited: A two-sector model of economic growth. Federal Reserve Board, Working Paper, Washington, DC.Google Scholar
  40. Wolff, E. (2010). Recent trends in household wealth in the United States: Rising debt and the middle class squeeze. An Update to 2007.” SSRN.

Copyright information

© Asian Development Bank Institute 2019

Authors and Affiliations

  1. 1.International Monetary Fund, Strategy, Policy and Review‎WashingtonUSA

Personalised recommendations