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

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  • Julian Di Giovanni
  • Jing Zhang
  • Andrei A Levchenko

Abstract

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

Suggested Citation

  • Julian Di Giovanni & Jing Zhang & Andrei A Levchenko, 2012. "The Global Welfare Impact of China; Trade Integration and Technological Change," IMF Working Papers 12/79, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/79
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    Cited by:

    1. Fabrice Defever & Alejandro Riaño, "undated". "China's Pure Exporter Subsidies," Discussion Papers 12/11, University of Nottingham, GEP.
    2. Tyers, Rod, 2015. "International effects of China's rise and transition: Neoclassical and Keynesian perspectives," Journal of Asian Economics, Elsevier, vol. 37(C), pages 1-19.
    3. Costa, Francisco & Garred, Jason & Pessoa, João Paulo, 2016. "Winners and losers from a commodities-for-manufactures trade boom," Journal of International Economics, Elsevier, vol. 102(C), pages 50-69.
    4. 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.
    5. Andrei A Levchenko & Jing Zhang, 2013. "The Global Labor Market Impact of Emerging Giants: A Quantitative Assessment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(3), pages 479-519, August.
    6. Uy, Timothy & Yi, Kei-Mu & Zhang, Jing, 2013. "Structural change in an open economy," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 667-682.
    7. 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.
    8. Rod Tyers, 2015. "Financial Integration and China's Global Impact," Economics Discussion / Working Papers 15-02, The University of Western Australia, Department of Economics.
    9. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2015. "Offshoring and Directed Technical Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 84-122, July.
    10. Iacovone, Leonardo & Rauch, Ferdinand & Winters, L. Alan, 2013. "Trade as an engine of creative destruction: Mexican experience with Chinese competition," Journal of International Economics, Elsevier, vol. 89(2), pages 379-392.
    11. repec:eee:deveco:v:132:y:2018:i:c:p:75-87 is not listed on IDEAS
    12. Hsieh, Chang-Tai & Ossa, Ralph, 2016. "A global view of productivity growth in China," Journal of International Economics, Elsevier, vol. 102(C), pages 209-224.
    13. Yuan Zi, 2016. "Trade Liberalization and the Great Labor Reallocation," IHEID Working Papers 18-2016, Economics Section, The Graduate Institute of International Studies.
    14. Ferdinando Monte, 2014. "Local Transmission of Trade Shocks," Working Papers 2014-001, Human Capital and Economic Opportunity Working Group.
    15. Peter Egger & Sergey K. Nigai, 2016. "World-Trade Growth Accounting," CESifo Working Paper Series 5831, CESifo Group Munich.
    16. repec:mie:wpaper:6237 is not listed on IDEAS
    17. Amiti, Mary & Dai, Mi & Feenstra, Robert C. & Romalis, John, 2017. "How did China’s WTO entry benefit U.S. consumers?," Staff Reports 817, Federal Reserve Bank of New York.
    18. Kurokawa, Yoshinori & Pang, Jiaren & Tang, Yao, 2016. "Exchange rate regimes and wage comovements in a Ricardian model with money," Journal of International Economics, Elsevier, vol. 102(C), pages 96-109.
    19. repec:cuf:journl:y:2018:v:19:i:1:wang:xie is not listed on IDEAS
    20. Pengfei Wang & Danyang Xie, 2018. "Trade, Sectorial Reallocation, and Growth," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 49-74, May.

    More about this item

    Keywords

    China; Economic models; Production growth; International trade; Trade integration; United States; productivity growth; trade costs; correlation; equation; Neoclassical Models of Trade; Economic Growth of Open Economies;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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