A Unified Model of Structural Adjustments and International Trade: Theory and Evidence from China
In this paper, we first document the patterns of structural adjustments in Chinese manufacturing production and exports using a firm level data from China. We find that manufacturing production became more capital intensive while exports became more labor intensive from 1999 to 2007. To explain these patterns, we unify major international trade theories by embedding the Melitz (2003) model of heterogeneous firm into the Dornbusch-Fischer-Samuelson model with both Ricardian and Heckscher-Ohlin (1977, 1980) comparative advantage. We discuss the equilibrium patterns of production and international trade. Then we solve the model numerically and analyze other equilibrium properties. Finally we study the comparative statics to examine the effects of trade liberalization, capital deepening and technology changes.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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