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Accommodating emerging giants in the global economy

Author

Listed:
  • Zhuokai Huang
  • Benny Kleinman
  • Ernest Liu
  • Stephen J. Redding

Abstract

How has aggregate income and welfare in the United States been affected by globalization and rapid productivity growth in emerging economies? We use the class of constant elasticity trade models to provide quantitative evidence on these questions. We find that reductions in worldwide trade frictions over the period from1960-2020 reduced the share of the United States in global GDP but raised its aggregate welfare. Similarly, productivity growth in Japan and China led to a decline in the relative income of the United States, but brought aggregate welfare gains from the resulting expansion in global production possibilities. Trade integration and foreign productivity growth have relatively modest effects on domestic income and welfare compared to domestic productivity growth.

Suggested Citation

  • Zhuokai Huang & Benny Kleinman & Ernest Liu & Stephen J. Redding, 2025. "Accommodating emerging giants in the global economy," CEP Discussion Papers dp2136, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp2136
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    References listed on IDEAS

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    1. J. R. Hicks, 1953. "An Inaugural Lecture," Oxford Economic Papers, Oxford University Press, vol. 5(2), pages 117-135.
    2. Christopher Clayton & Matteo Maggiori & Jesse Schreger, 2026. "A Framework for Geoeconomics," Econometrica, Econometric Society, vol. 94(1), pages 105-136, January.
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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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