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The International Effects of China’s Growth, Trade and Education Booms

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  • Richard G. Harris
  • Peter E. Robertson
  • Jessica Y. Xu

Abstract

China’s international trade flows have increased by 500% since 1992, far outstripping GDP growth. Likewise tertiary education enrollments have increased by 300%. We simulate these changes using a multi-sector growth model of the Chinese and USA economies. A decade of trade biased growth in China is found to have a large effect on the USA economy – raising GDP approximately 3-4.5 percentage points. We also show that the trade bias in China’s growth accounts for more than half of the observed growth in tertiary enrolments in China. In contrast neutral growth has practically no effect on USA incomes or China’s stock of skilled labour. Finally the simulations reveal that China’s education boom per se has practically no long run impact on the USA economy. The results thus indicate that the pattern of productivity growth in exports sectors, as might be caused by falling trade costs, has been critical in transmitting benefits of Chinese growth to the world economy. They also point to an important link between falling trade costs and human capital formation.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 34 (2011)
Issue (Month): 10 (October)
Pages: 1703-1725

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Handle: RePEc:bla:worlde:v:34:y:2011:i:10:p:1703-1725

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  1. Wing Thye Woo, . "Chinese Economic Growth: Sources And Prospects," Department of Economics, California Davis - Department of Economics 96-08, California Davis - Department of Economics.
  2. Knight, John & Li, Shi, 1996. "Educational Attainment and the Rural--Urban Divide in China," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 83-117, February.
  3. Mary Amiti & Caroline Freund, 2010. "The Anatomy of China's Export Growth," NBER Chapters, in: China's Growing Role in World Trade, pages 35-56 National Bureau of Economic Research, Inc.
  4. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, Elsevier, vol. 71(2), pages 311-328, August.
  5. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 42(3), pages 691-751, September.
  6. Yao Li & John Whalley & Shunming Zhang & Xiliang Zhao, 2008. "The Higher Educational Transformation of China and Its Global Implications," NBER Working Papers 13849, National Bureau of Economic Research, Inc.
  7. Alessia Amighini, 2005. "China in the international fragmentation of production: Evidence from the ICT industry," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 203-219, December.
  8. Bussière, Matthieu & Schnatz, Bernd, 2006. "Evaluating China’s integration in world trade with a gravity model based benchmark," Working Paper Series, European Central Bank 0693, European Central Bank.
  9. Lee Branstetter & Nicholas Lardy, 2006. "China's Embrace of Globalization," NBER Working Papers 12373, National Bureau of Economic Research, Inc.
  10. Bryan Graham & Jonathan Temple, 2006. "Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?," Journal of Economic Growth, Springer, Springer, vol. 11(1), pages 5-41, 03.
  11. Prema-chandra Athukorala, 2003. "Product Fragmentation and Trade Patterns in East Asia," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 2003-21, The Australian National University, Arndt-Corden Department of Economics.
  12. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, Elsevier, vol. 53(1), pages 1-27, February.
  13. Tyers, Rod & Yang, Yongzheng, 2000. "Capital-Skill Complementarity and Wage Outcomes Following Technical Change in a Global Model," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 16(3), pages 23-41, Autumn.
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Cited by:
  1. Rod Tyers, 2014. "International Effects of China’s Rise and Transition: Neoclassical and Keynesian Perspectives," CAMA Working Papers 2014-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Peter E Robertson, 2011. "Deep Impact: China and the World Economy," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 11-01, The University of Western Australia, Department of Economics.
  3. Rod TYERS, 2013. "China and Global Macroeconomic Interdependence," CAMA Working Papers 2013-34, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Rod Tyers, 2013. "Looking Inward for Transformative Growth in China," CAMA Working Papers 2013-48, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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