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 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 toward its comparative disadvantage sectors. This finding is driven by the inherently multilateral nature of world trade. (JEL F14, F43, 019, 033, 047, P24, P33)