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Structural Adjustments and International Trade: Theory and Evidence from China

Hanwei Huang, Jiandong Ju and Vivian Z. Yue

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper studies how changes in factor endowment, technology, and trade costs jointly determine the structural adjustments, which are defined as changes in distributions of production and exports. We document the structural adjustments in Chinese manufacturing firms from 1999 to 2007 and find that production became more capital-intensive while exports did not. We structurally estimate a Ricardian and Heckscher-Ohlin model with heterogeneous firms to explain this seemingly puzzling pattern. Counterfactual simulations show that capital deepening made Chinese production more capital-intensive, but technology changes that biased toward the labor-intensive sectors and trade liberalizations provided a counterbalancing force.

Keywords: structural adjustments; comparative advantage; heterogeneous firm (search for similar items in EconPapers)
JEL-codes: F12 L16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-int and nep-tra
Date: 2017-11
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