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The Global Welfare Impact of China: Trade Integration and Technological Change

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Author Info

  • Julian di Giovanni

    (International Monetary Fund and University of Toronto)

  • Andrei A. Levchenko

    (University of Michigan and NBER)

  • Jing Zhang

    (University of Michigan)

Abstract

This paper evaluates the global welfare impact of ChinaÕs trade integration and technological change in a quantitative Ricardian-Heckscher-Ohlin model implemented on 75 countries. We simulate two alternative productivity growth scenarios: a ÒbalancedÓ one in which ChinaÕs productivity grows at the same rate in each sector, and an ÒunbalancedÓ one in which ChinaÕs 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 ChinaÕs 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 ChinaÕs trade integration.

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Bibliographic Info

Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 625.

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Length: 59 pages
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Handle: RePEc:mie:wpaper:625

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Postal: ANN ARBOR MICHIGAN 48109
Web page: http://www.fordschool.umich.edu/rsie/
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Related research

Keywords: China; productivity growth; international trade;

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References

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  1. Chen, Natalie & Novy, Dennis, 2011. "Gravity, trade integration, and heterogeneity across industries," Journal of International Economics, Elsevier, vol. 85(2), pages 206-221.
  2. Do, Quy-Toan & Levchenko, Andrei A., 2007. "Comparative advantage, demand for external finance, and financial development," Journal of Financial Economics, Elsevier, vol. 86(3), pages 796-834, December.
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Citations

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Cited by:
  1. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2013. "Offshoring and Directed Technical Change," Working Papers 735, Barcelona Graduate School of Economics.
  2. Andrei A. Levchenko & Jing Zhang, 2012. "Comparative advantage and the welfare impact of European integration," Economic Policy, CEPR & CES & MSH, vol. 27(72), pages 567-602, October.
  3. Fabrice Defever & Alejandro Riaño, . "China's Pure Exporter Subsidies," Discussion Papers 12/11, University of Nottingham, GEP.
  4. Kei-Mu Yi & Jing Zhang, 2010. "Structural Change in an Open Economy," Working Papers 595, Research Seminar in International Economics, University of Michigan.
  5. Pierre-Daniel G. Sarte & Esteban Rossi-Hansberg & Fernando Parro & Lorenzo Caliendo, 2013. "The impact of regional and sectoral productivity changes on the U.S. economy," Working Paper 13-14, Federal Reserve Bank of Richmond.
  6. Andrei A. Levchenko & Jing Zhang, 2013. "The global labor market impact of rmerging giants: a quantitative assessment," Working Paper Series WP-2013-10, Federal Reserve Bank of Chicago.

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