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A Unified Model of Structural Adjustments and International Trade: Theory and Evidence from China

  • Vivian Yue

    (Federal Reserve Board of Governors)

  • Jiandong Ju

    (Tsinghua University)

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    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.

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    Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 859.

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    Date of creation: 2013
    Date of revision:
    Handle: RePEc:red:sed013:859
    Contact details of provider: Postal:
    Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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