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Structural Adjustments and International Trade: Theory and Evidence from China

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Listed:
  • Hanwei Huang
  • Jiandong Ju
  • Vivian Z. Yue

Abstract

This paper studies how changes in factor endowment, technology, and trade costs jointly determine the structural adjustments, which are defined as changes in distributions of production and exports. We document the structural adjustments in Chinese manufacturing firms from 1999 to 2007 and find that production became more capital-intensive while exports did not. We structurally estimate a Ricardian and Heckscher-Ohlin model with heterogeneous firms to explain this seemingly puzzling pattern. Counterfactual simulations show that capital deepening made Chinese production more capital-intensive, but technology changes that biased toward the labor-intensive sectors and trade liberalizations provided a counterbalancing force.

Suggested Citation

  • Hanwei Huang & Jiandong Ju & Vivian Z. Yue, 2017. "Structural Adjustments and International Trade: Theory and Evidence from China," CEP Discussion Papers dp1508, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1508
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    References listed on IDEAS

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    More about this item

    Keywords

    structural adjustments; comparative advantage; heterogeneous firm;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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