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The Global Welfare Impact of China

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Author Info

  • Julian di Giovanni
  • Jing Zhang
  • Andrei A. Levchenko

Abstract

This paper evaluates the global welfare impact of China''s trade integration and technological change in a quantitative Ricardian-Heckscher-Ohlin model implemented on 75 countries. We simulate two alternative productivity growth scenarios: a "balanced" one in which China''s productivity grows at the same rate in each sector, and an "unbalanced" one in which China''s comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson, 2004), the large majority of countries in the sample, including the developed ones, experience an order of magnitude larger welfare gains when China''s productivity growth is biased towards its comparative disadvantage sectors. We demonstrate both analytically and quantitatively that this finding is driven by the inherently multilateral nature of world trade. As a separate but related exercise we quantify the worldwide welfare gains from China''s trade integration.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/79.

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Length: 62
Date of creation: 01 Mar 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/79

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Related research

Keywords: Economic models; Production growth; Trade integration;

This paper has been announced in the following NEP Reports:

References

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  1. Chang-Tai Hsieh & Ralph Ossa, 2011. "A Global View of Productivity Growth in China," NBER Working Papers 16778, National Bureau of Economic Research, Inc.
  2. Jing Zhang & Kei-Mu Yi, 2009. "Structural Change in an Open Economy," 2009 Meeting Papers 804, Society for Economic Dynamics.
  3. Nicholas Bloom & Mirko Draca & John Van Reenen, 2011. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," CEP Discussion Papers dp1000, Centre for Economic Performance, LSE.
  4. repec:cge:warwcg:13 is not listed on IDEAS
  5. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Ricardian selection," MPRA Paper 16950, University Library of Munich, Germany.
  6. Eaton, Jonathan & Kortum, Sam & Neiman, Brent & Romalis, John, 2013. "Trade and the Global Recession," Working Papers 2013-21, University of Sydney, School of Economics.
  7. Andrei A. Levchenko & Jing Zhang, 2011. "The Evolution of Comparative Advantage: Measurement and Welfare Implications," NBER Working Papers 16806, National Bureau of Economic Research, Inc.
  8. University of Iowa & Michael E. Waugh, 2007. "International Trade and Income Differences," 2007 Meeting Papers 492, Society for Economic Dynamics.
  9. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports 72, Federal Reserve Bank of New York.
  10. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  11. Ben S. Bernanke & Refet S. Gurkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously," NBER Working Papers 8365, National Bureau of Economic Research, Inc.
  12. Do, Quy-Toan & Levchenko, Andrei A., 2006. "Comparative advantage, demand for external finance, and financial development," Policy Research Working Paper Series 3889, The World Bank.
  13. Serge Shikher, 2012. "Putting industries into the Eaton--Kortum model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(6), pages 807-837, November.
  14. Gallagher, Kevin P. & Moreno-Brid, Juan Carlos & Porzecanski, Roberto, 2008. "The Dynamism of Mexican Exports: Lost in (Chinese) Translation?," World Development, Elsevier, vol. 36(8), pages 1365-1380, August.
  15. Lorenzo Caliendo & Fernando Parro, 2012. "Estimates of the Trade and Welfare Effects of NAFTA," NBER Working Papers 18508, National Bureau of Economic Research, Inc.
  16. Ghosh, Madanmohan & Rao, Someshwar, 2010. "Chinese accession to the WTO: Economic implications for China, other Asian and North American economies," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 389-398, May.
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