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The rise of China and India: blessing or curse for the advanced countries?

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  • Stracca, Livio

Abstract

This paper evaluates the impact of the rise of large emerging manufacturing exporters such as China and India on economic growth in advanced countries. After illustrating the possible theoretical channels, I estimate a growth regression based on 3-year average data augmented with country-specific measures of import and export competition from China and India using instrumental variables. Stronger import competition from China and India leads to stronger income growth in advanced countries, but to a loss of manufacturing jobs. A more flexible labour market, lower concentration of employment in manufacturing and pre-existing trade links with China and India help advanced countries to maximise the growth dividend resulting from their rise in world export markets. JEL Classification: F02, F15

Suggested Citation

  • Stracca, Livio, 2013. "The rise of China and India: blessing or curse for the advanced countries?," Working Paper Series 1620, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20131620
    Note: 335958
    as

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    Cited by:

    1. Servaas Storm & C.W.M. Naastepad, 2015. "Crisis and Recovery in the German Economy: The Real Lessons," Working Papers Series 10, Institute for New Economic Thinking.
    2. Martina Basarac Sertić & Anita Čeh Časni & Valentina Vučković, 2017. "The impact of China's imports on European Union industrial employment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(1), pages 91-109, January.

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    More about this item

    Keywords

    China; comparative advantage; economic growth; globalisation; India; offshoring; trade;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration

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