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

  • Julian di Giovanni

    (International Monetary Fund and University of Toronto)

  • Andrei A. Levchenko

    (University of Michigan and NBER)

  • Jing Zhang

    (University of Michigan)

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

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File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers601-625/r625.pdf
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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 625.

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Length: 59 pages
Date of creation: 14 Feb 2012
Handle: RePEc:mie:wpaper:625
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