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Trade, Migration and Productivity: A Quantitative Analysis of China

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  • Trevor Tombe
  • Xiaodong Zhu

Abstract

We study how misallocation due to goods- and labour-market frictions affect aggregate productivity in China. Combining unique data with a general equilibrium model of internal and international trade, and migration across regions and sectors, we quantify the magnitude and consequences of trade and migration costs. The costs were high in 2000, but declined afterward. The decline accounts for roughly two-fifths of aggregate labour productivity growth in China between 2000 and 2005. Reductions in internal rather than international costs are particularly important. Despite the decline, migration costs are still high and potential gains from further reform are large.

Suggested Citation

  • Trevor Tombe & Xiaodong Zhu, 2015. "Trade, Migration and Productivity: A Quantitative Analysis of China," Working Papers tecipa-542, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-542
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    More about this item

    Keywords

    migration; internal trade; spatial misallocation; gains from trade; aggregate productivity; China;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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