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

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  • Mr. Julian Di Giovanni
  • Mr. Jing Zhang
  • Mr. 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

  • Mr. Julian Di Giovanni & Mr. Jing Zhang & Mr. Andrei A Levchenko, 2012. "The Global Welfare Impact of China: Trade Integration and Technological Change," IMF Working Papers 2012/079, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/079
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    More about this item

    Keywords

    WP; unbalanced growth; China; productivity growth; international trade; comparative advantage; growth scenario; export basket; trade cost; technology compare; productivity estimate; sectoral productivity; price level; export share; s distance; Productivity; Wages; Trade balance; Exports; Sustainable growth; Global; South Asia; East Asia; Middle East; North Africa;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • 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
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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