Upskilling China: Implications for Middle‐Income Economies

Varan Kitayaporn and Ian Coxhead

The World Economy, 2025, vol. 48, issue 6, 1297-1320

Abstract: Acquiring human capital and climbing the ladder of manufacturing sophistication are development policy goals shared by most middle‐income countries. What happens when China, a large economy with active industrial policy, begins to expand into sectoral niches formerly occupied by its middle‐income trade partners? We build a multi‐country, multi‐sector general equilibrium model of global trade and perform counterfactual experiments aimed at assessing the effects of China's human capital investments and industrial policies on trade, production and factor returns elsewhere in the developing world. The model features skilled and unskilled labour as primary inputs, as well as domestic and international trade in intermediate goods. Simulation results suggest that China's growth strategy may cause middle‐income economies to lose global export shares in their more skill‐intensive sectors and to be pushed toward blue‐collar and resource‐based exports. The effects are especially pronounced in Southeast Asia since that region is most closely linked to China's economy. Skill premia will fall, reducing incentives to invest in human capital. In the absence of policy responses, these trends might dim long‐run development prospects.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/twec.13693

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:48:y:2025:i:6:p:1297-1320

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().