Working Paper: CEPR ID: DP9683
Authors: Julian Di Giovanni; Andrei A. Levchenko; Jing Zhang
Abstract: This paper evaluates the global welfare impact of China's trade integration and technological change in a multi-country quantitative Ricardian-Heckscher-Ohlin model. We simulate two alternative growth scenarios: a "balanced" one in which China's productivity grows at the same rate in each sector, and an "unbalanced" one in which China's comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson 2004), the large majority of countries experience significantly larger welfare gains when China's productivity growth is biased towards its comparative disadvantage sectors. This finding is driven by the inherently multilateral nature of world trade.
Keywords: China; International Trade; Productivity Growth
JEL Codes: F11; F43; O33; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| China's productivity growth biased toward its comparative disadvantage sectors (O49) | larger welfare gains for majority of countries (D69) |
| China's productivity growth uniformly distributed across sectors (O49) | nearly zero welfare gains for majority of countries (D69) |
| Unbalanced growth in China (O40) | enhances China's dissimilarity to the global productivity frontier (O49) |
| China's productivity changes relative to a weighted average of global productivity (O49) | welfare impacts for trading partners (F69) |
| Multilateral nature of trade (F10) | welfare outcomes driven (I38) |
| China's productivity growth (O49) | benefits welfare of trading partners (F10) |