Working Paper

The global welfare impact of China: trade integration and technological change

Abstract: This paper evaluates the global welfare impact of China's trade integration and technological change in a quantitative Ric a rdian-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 sam e 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 fnding is driven by the inherently mult ilateral nature of world trade. As a separate but related exercise we quantify the worldwide welfare gains from China's trade integration.

Keywords: Production (Economic theory); technological innovations; welfare;

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2013

Number: WP-2013-08