When companies spend big on high-tech computers, the workers actually end up getting a bigger slice of the profit pie, not a smaller one.
March 27, 2026
Original Paper
From Computing Infrastructure to Labor Income Share: Evidence from China's "East Data, West Computing" Initiative
SSRN · 6471261
The Takeaway
While tech investment is often feared as a tool for automation that favors capital owners, China's 'East Data, West Computing' initiative actually increased the share of income going to non-executive employees and reduced within-firm pay inequality by boosting productivity and human capital.
From the abstract
This paper examines how large-scale computing infrastructure investment shapes the functional distribution of income between labor and capital. Using China's “East Data, West Computing” initiative as a quasi-natural experiment, we exploit the geographic designation of eight national computing power hubs in a difference-in-differences design. We find that the initiative significantly increases labor income share, with gains driven entirely by non-executive employees and accompanied by a redu