The influence of factor-biased technological progress on the share of labour income in the digital economy

Abstract

ABSTRACT This study introduces digital factor into the CES function to construct a normalised supply-side system of three-factor CES production function with factor-biased technological progress. Based on the empirical data of technology-intensive, capital-intensive, and labour-intensive manufacturing industries in China, this study measures the elasticity of substitution, factor efficiency and the bias of technical progress of three types of manufacturing industries, and analyses the impact of technical progress bias index on the share of labour income. We find that: from 2010 to 2018, the substitution elasticities of technology-intensive, capital-intensive, and labour-intensive industries are all less than 1, indicating that the digital factor, labour and capital of the three types of industries are complementary. The technical progress of labour-intensive and capital-intensive industries are both biased towards the capital, while technology-intensive industries have labour-biased technical progress. The development of digital-biased technology is conducive to the increase of the labour income share of labour-intensive industry and technology-intensive industry, and both capital-biased technology and labour-biased technology contribute to the growth of labour income share of capital-intensive industry.