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Induced innovation: evidence from China’s secondary industry

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  • Belton M. Fleisher
  • William H. McGuire
  • Xiaojun Wang
  • Min Qiang Zhao

Abstract

We investigate the effect of rising labour costs on induced technological change in China’s secondary industry. Building on insights developed in a rich literature, we propose a model linking changes in labour productivity to changes in labour costs and the predetermined availability of physical capital. Importantly, we derive testable hypotheses to distinguish induced innovation from standard substitution of capital for labour under fixed technology. Our empirical results support the hypothesis that rising wages have induced labour-saving innovation in China, at least in the decade of the 1990s, but less so or not at all after the middle of the next decade.

Suggested Citation

  • Belton M. Fleisher & William H. McGuire & Xiaojun Wang & Min Qiang Zhao, 2021. "Induced innovation: evidence from China’s secondary industry," Applied Economics, Taylor & Francis Journals, vol. 53(52), pages 6075-6093, November.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:52:p:6075-6093
    DOI: 10.1080/00036846.2021.1937037
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    Cited by:

    1. Belton M. Fleisher & William H. McGuire & Yaqin Su & Min Qiang Zhao, 2024. "Polarization of employment and wages in China," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 32(1), pages 49-71, January.
    2. Ka Kei Gary Wong & Min Qiang Zhao, 2023. "Induced innovation and its impact on productivity growth in China: a latent variable approach," Empirical Economics, Springer, vol. 65(1), pages 371-399, July.
    3. Han, Yajie & Han, Liyan & Liu, Chengkun & Wang, Qisong, 2024. "How does government R&D subsidies affect enterprises’ viability? An investigation on inverted U-shaped relationship," Finance Research Letters, Elsevier, vol. 70(C).

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    More about this item

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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