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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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    References listed on IDEAS

    as
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    Cited by:

    1. Garriga, Carlos & Tang, Yang & Wang, Ping, 2014. "Rural-Urban Migration, Structural Transformation, and Housing Markets in China," Working Papers 2014-28, Federal Reserve Bank of St. Louis, revised 21 Apr 2016.
    2. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    3. Owen Zidar & Juan Carlos Serrato & Eduardo Morales & Pablo Fajgelbaum, 2015. "State Taxes and Spatial Misallocation," 2015 Meeting Papers 877, Society for Economic Dynamics.
    4. Hau, Harald & Huang, Yi & Wang, Gewei, 2016. "Firm Response to Competitive Shocks: Evidence from China's Minimum Wage Policy," CEPR Discussion Papers 11429, C.E.P.R. Discussion Papers.
    5. Heiwai Tang & Fei Wang & Zhi Wang, 2016. "Extending the Input-Output Table Based on Firm-level Data," CESifo Working Paper Series 5811, CESifo Group Munich.
    6. Huang, Hanwei & Ju, Jiandong & Yue, Vivian Z., 2017. "Structural adjustments and international trade: theory and evidence from China," LSE Research Online Documents on Economics 86601, London School of Economics and Political Science, LSE Library.
    7. Jacques-Francois Thisse & Philip Ushchev, 2016. "When Can A Demand System Be Described By A Multinomial Logit With Income Effect?," HSE Working papers WP BRP 139/EC/2016, National Research University Higher School of Economics.
    8. Nathaniel Baum-Snow & Loren Brandt & J. Vernon Henderson & Matthew A. Turner & Qinghua Zhang, 2016. "Highways, Market Access and Urban Growth in China," SERC Discussion Papers 0200, Spatial Economics Research Centre, LSE.
    9. repec:unt:jnapdj:v:24:y:2017:i:1:p:1-21 is not listed on IDEAS
    10. Tasso Adamopoulos & Loren Brandt & Jessica Leight & Diego Restuccia, 2017. "Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China," Working Papers tecipa-593, University of Toronto, Department of Economics.
    11. Fukao, Kyoji & Paul, Saumik, 2017. "The Role of Structural Transformation in Regional Convergence in Japan: 1874-2008," Discussion Paper Series 665, Institute of Economic Research, Hitotsubashi University.
    12. Sheng, Liugang & Yang, Dennis T., 2017. "Offshoring and Wage Inequality: Theory and Evidence from China," IZA Discussion Papers 10924, Institute for the Study of Labor (IZA).
    13. repec:pal:imfecr:v:65:y:2017:i:3:d:10.1057_s41308-017-0036-2 is not listed on IDEAS
    14. Giovanni Facchini & Maggie Y. Liu & Anna Maria Mayda & Minghai Zhou, 2017. "The impact of China's WTO accession on internal migration," Development Working Papers 422, Centro Studi Luca d'Agliano, University of Milano, revised 24 Feb 2017.
    15. Facchini, Giovanni & Liu, Maggie Y. & Mayda, Anna Maria & Zhou, Minghai, 2018. "China's "Great Migration": The Impact of the Reduction in Trade Policy Uncertainty," IZA Discussion Papers 11279, Institute for the Study of Labor (IZA).
    16. Tabuchi, Takatoshi & Thisse, Jacques François & Zhu, Xiwei, 2016. "Does technological progress magnify regional disparities?," IDE Discussion Papers 599, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    17. Lorenzo Caliendo & Fernando Parro & Aleh Tsyvinski, 2017. "Distortions and the Structure of the World Economy," NBER Working Papers 23332, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    migration; internal trade; spatial misallocation; gains from trade; aggregate productivity; China;

    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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