Does the exposure to routinization explain the evolution of the labor share of income? Evidence from Asia

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.