Working Paper: CEPR ID: DP16119
Authors: Lei Fang; Berthold Herrendorf
Abstract: We document that the employment share of high-skill-intensive services is much lower in China than in countries with similar GDP per capita. We build a model of structural change with goods and low- and high-skill-intensive services to account for this observation. We find that large distortions limit the size of high-skill-intensive services in China. If they were removed, both high-skill-intensive services and GDP per capita would increase considerably. We document a strong presence of state-owned enterprises in high-skill-intensive services and suggest that this leads to important distortions.
Keywords: China; high-skill-intensive services; state-owned enterprises; structural change
JEL Codes: O41; O47; O51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| removal of distortions (H21) | employment share of high-skill-intensive services (J24) |
| removal of distortions (H21) | GDP per capita (O49) |
| large distortions (F12) | size of high-skill-intensive services (L89) |
| presence of SOEs (L32) | price distortions in high-skill-intensive services (L89) |
| economic development (O29) | structure of employment (J21) |