The Global Welfare Impact of China : Trade Integration and Technological Change

Author/Editor: Julian di Giovanni ; Jing Zhang ; Andrei A. Levchenko
Publication Date: March 01, 2012
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper evaluates the global welfare impact of China''s trade integration and technological change in a quantitative Ricardian-Heckscher-Ohlin model implemented on 75 countries. We simulate two alternative productivity 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 in the sample, including the developed ones, experience an order of magnitude larger welfare gains when China''s productivity growth is biased towards its comparative disadvantage sectors. We demonstrate both analytically and quantitatively that this finding is driven by the inherently multilateral nature of world trade. As a separate but related exercise we quantify the worldwide welfare gains from China''s trade integration.
Series: Working Paper No. 12/79
Subject(s): Economic models | Production growth | Trade integration

Author's Keyword(s): China | productivity growth | international trade
Publication Date: March 01, 2012
ISBN/ISSN: 9781475502312/1018-5941 Format: Paper
Stock No: WPIEA2012079 Pages: 62
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