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Structural Change and Global Trade

Author

Listed:
  • Logan Lewis

    (Federal Reserve Board)

  • Ryan Monarch

    (Federal Reserve Board)

  • Michael Sposi

    (Southern Methodist University)

  • Jing Zhang

    (Federal Reserve Bank of Chicago)

Abstract

Services, which are less traded than goods, rose from 55 percent of world expenditure in 1970 to 75 percent in 2015. Using a Ricardian trade model incorporating endogenous structural change, we quantify how this substantial shift in consumption has affected trade. Without structural change, we find that the world trade to GDP ratio would be 13 percentage points higher by 2015, about half the boost delivered from declining trade costs. In addition, a world without structural change would have had about 40 percent greater welfare gains from the trade integration over the past four decades. Absent further reductions in trade costs, ongoing structural change implies that world trade as a share of GDP would eventually decline. Going forward, higher income countries gain relatively more from reducing services trade costs than from reducing goods trade costs.

Suggested Citation

  • Logan Lewis & Ryan Monarch & Michael Sposi & Jing Zhang, 2020. "Structural Change and Global Trade," Departmental Working Papers 2002, Southern Methodist University, Department of Economics.
    • Handle: RePEc:smu:ecowpa:2002
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    Cited by:

    1. Chen, Natalie & Novy, Dennis & , Perroni, Carlo & Chern Wong, Horng Chern, 2023. "Urban-Biased Structural Change," The Warwick Economics Research Paper Series (TWERPS) 1484, University of Warwick, Department of Economics.
    2. Michael Sposi & Jing Zhang & Kei-Mu Yi, 2018. "Accounting for Structural Change Over Time: A Case Study of Three Middle-Income Countries," 2018 Meeting Papers 1141, Society for Economic Dynamics.
    3. Phong B. Dao, 2021. "A CUSUM-Based Approach for Condition Monitoring and Fault Diagnosis of Wind Turbines," Energies, MDPI, vol. 14(11), pages 1-19, June.
    4. Asjad Naqvi, 2025. "Global Demand and Supply Elasticities and the Impact of Tariff Shocks," WIFO Working Papers 702, WIFO.
    5. Dainauskas, Justas, 2024. "The network origins of trade comovement," Journal of International Economics, Elsevier, vol. 152(C).
    6. Bonadio, Barthélémy & Huo, Zhen & Levchenko, Andrei A. & Pandalai-Nayar, Nitya, 2025. "Globalization, structural change and international comovement," Journal of Monetary Economics, Elsevier, vol. 151(C).
    7. Serhan Cevik & Jan Gottschalk & Eric Hutton & Laura Jaramillo & Pooja Karnane & Mousse Sow, 2019. "Structural transformation and tax efficiency," International Finance, Wiley Blackwell, vol. 22(3), pages 341-379, December.
    8. Stanojević Nataša, 2020. "Deglobalization of the World Economy and its Effects on the Western Balkan Countries," Economic Themes, Sciendo, vol. 58(3), pages 343-362, September.
    9. Michael Sposi & Jing Zhang & Kei-Mu Yi, 2019. "Structural Change and Deindustrialization," 2019 Meeting Papers 1328, Society for Economic Dynamics.
    10. Ricardo Reyes-Heroles, 2018. "Globalization and Structural Change in the United States: A Quantitative Assessment," 2018 Meeting Papers 1027, Society for Economic Dynamics.
    11. Nils M. Gornemann & Pablo Guerrón-Quintana & Felipe Saffie, 2020. "Exchange Rates and Endogenous Productivity," International Finance Discussion Papers 1301, Board of Governors of the Federal Reserve System (U.S.).
    12. Diego Comin & Danial Lashkari & Martí Mestieri, 2021. "Structural Change With Long‐Run Income and Price Effects," Econometrica, Econometric Society, vol. 89(1), pages 311-374, January.
    13. Benjamin N. Dennis & Talan B. İşcan, 2020. "Structural change and global trade flows: Does an emerging giant matter?," Review of International Economics, Wiley Blackwell, vol. 28(5), pages 1191-1231, November.
    14. Catherine Boulatoff & Talan B. İşcan & Yulia Kotlyarova, 2022. "Does Distance Matter for Trade in Services? The Case of Interprovincial Trade in Canada," Open Economies Review, Springer, vol. 33(1), pages 157-185, February.
    15. Andrea Papetti, 2021. "Population aging, relative prices and capital flows across the globe," Temi di discussione (Economic working papers) 1333, Bank of Italy, Economic Research and International Relations Area.
    16. Tasso Adamopoulos & Fernando Leibovici, 2024. "Trade Risk and Food Security," Working Papers 2024-004, Federal Reserve Bank of St. Louis, revised 05 Nov 2025.
    17. Khan, Muhammad Aamir, 2020. "Cross sectoral linkages to explain structural transformation in Nepal," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 221-235.
    18. Saad, Ayhab F., 2021. "Institutional change in the global economy: How trade reform can be detrimental to welfare," Economic Modelling, Elsevier, vol. 95(C), pages 97-110.
    19. William F. Lincoln & Andrew H. McCallum & Michael Siemer, 2019. "The Great Recession and a Missing Generation of Exporters," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(4), pages 703-745, December.
    20. Vanessa ALVIAREZ & Cheng CHEN & Nitya PANDALAI-NAYAR & Liliana VARELA & Kei-Mu YI & Hongyong ZHANG, 2021. "Multinationals and Structural Transformation," Discussion papers 21100, Research Institute of Economy, Trade and Industry (RIETI).

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    Keywords

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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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