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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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Keywords: China; productivity growth; international trade;

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References

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  1. Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2011. "Trade and the Global Recession," NBER Working Papers 16666, National Bureau of Economic Research, Inc.
  2. 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.
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Citations

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Cited by:
  1. Fabrice Defever & Alejandro Riaño, 2012. "China's Pure Exporter Subsidies," CESifo Working Paper Series 4054, CESifo Group Munich.
  2. Kei-Mu Yi & Jing Zhang, 2010. "Structural Change in an Open Economy," Working Papers 595, Research Seminar in International Economics, University of Michigan.
  3. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2013. "Offshoring and Directed Technical Change," Working Papers 735, Barcelona Graduate School of Economics.
  4. 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.
  5. Andrei A. Levchenko & Jing Zhang, . "Comparative Advantage and the Welfare Impact of European Integration," Working Papers 626, Research Seminar in International Economics, University of Michigan.
  6. Andrei A. Levchenko & Jing Zhang, . "The Global Labor Market Impact of Emerging Giants: a Quantitative Assessment," Working Papers 637, Research Seminar in International Economics, University of Michigan.

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