Summary:
Digital technologies have thoroughly reshaped the income distribution pattern of global labor markets. Nevertheless, China is confronted with the “skill premium puzzle”: the wage gap between high-skilled and low-skilled labor keeps widening as the wages of high-skilled workers grow at a faster pace. This issue exerts adverse impacts on sustained economic growth and long-term social stability, such as slower employment growth and declining consumption levels. Among various driving factors, the impact of digitalization on labor skill premium cannot be ignored. As core production factors embedded within traditional corporate operations, data and digital technologies rely on other input factors to create value, which triggers the restructuring of various production factors within firms. Specifically, digitalization reshapes the allocation structure of high-skilled and low-skilled labor inputs, altering the internal labor allocation of enterprises. Accordingly, firms will witness changes in their internal labor demand structure and wage levels during the process of digital transformation. Furthermore, as production networks between enterprises become increasingly interconnected, the impacts of digitalization are not confined within individual firms. Instead, knowledge, information and technological factors are transmitted through business cooperation and transactions among supply chain participants, generating spillover effects on other firms along the industrial chain. Therefore, exploring how digital transformation affects labor skill premium and its internal mechanisms from a supply chain perspective not only helps theoretically clarify how digitalization shapes the factor income distribution structure, but also offers practical references for leveraging digital tools to improve income distribution. Extant literature has conducted extensive discussions on digital transformation and intra-firm labor skill premium. However, most studies treat firms as isolated entities, ignoring the spillover effects generated by vertical supply chain linkages. Few studies distinguish the heterogeneous impacts of midstream firms' digital transformation on upstream suppliers and downstream customers. This paper adopts the perspective of supply chain spillover to systematically investigate the effects, transmission paths and asymmetric disparities of midstream enterprises' digital transformation on the labor skill premium of upstream and downstream firms, providing practical insights for optimizing income distribution via digitalization. Based on matched “supplier-firm-customer” samples constructed with data of China's A-share listed companies from 2011 to 2023, this paper empirically examines the impacts of digital transformation on upstream and downstream labor skill premium from the supply chain spillover perspective. The results show that midstream firms' digital transformation significantly reduces labor skill premium of upstream and downstream enterprises, and this narrowing effect is more pronounced for downstream firms. Mechanism analysis indicates that the impacts of midstream digital transformation on labor skill premium spread to upstream and downstream firms through four channels: boosting digital technology diffusion, accelerating collaborative production, optimizing production-demand coordination and improving information transparency, with all four channels exerting stronger effects on downstream enterprises.Further analysis reveals that theimpacts of midstream enterprises' digital transformation exhibitheterogeneous characteristicsacross different industrial links.The reduction in labor skillpremiums of upstreamenterprises is mainly driven bymidstream firms' digitaltransformation in theinformatized manufacturing,customized product, and targetedservice links, while thenarrowing of labor skillpremiums for downstreamenterprises primarily stems frommidstream firms' digitaltransformation within theinformatized manufacturing linkalone. This paper makes three marginal contributions relative to prior research. First, it expands the research scope on the nexus between digital transformation and labor skill premium by incorporating cross-firm supply chain spillover along industrial chains. Most existing studies analyze the influences of technological progress and artificial intelligence on labor skill premium within single firms, regarding each enterprise as an independent unit and rarely discussing how supply chain linkages amplify or mitigate the labor skill premium induced by digital transformation. By incorporating inter-firm supply chain connections into the analytical framework, this paper provides a novel research perspective for relevant fields. Second, it uncovers the underlying mechanisms through which digital transformation reshapes labor skill premium across upstream and downstream supply chain participants. Previous research on the supply chain spillover of digitalization mainly focuses on information exchange, knowledge dissemination and resource allocation, with little attention paid to labor skill premium. From the supply chain spillover perspective, this paper identifies four transmission channels linking digital transformation to labor skill premium of supply chain partners, supplementing new theoretical mechanisms for subsequent studies. Third, this paper further explores the differentiated spillover influences of digital transformation across different production links of midstream firms on upstream and downstream labor skill premium, and provides new empirical evidence for the government and enterprises to optimize corporate labor demand structures and factor income distribution through digital transformation.
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