Accommodating Emerging Giants in the Global Economy

Zhuokai Huang, Benny Kleinman, Ernest Liu and Stephen Redding

No 34530, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How has aggregate income and welfare in the United States been affected by globalization and rapid productivity growth in emerging economies? We use the class of constant elasticity trade models to provide quantitative evidence on these questions. We find that reductions in worldwide trade frictions over the period from 1960-2020 reduced the share of the United States in global GDP but raised its aggregate welfare. Similarly, productivity growth in Japan and China led to a decline in the relative income of the United States, but brought aggregate welfare gains from the resulting expansion in global production possibilities. Trade integration and foreign productivity growth have relatively modest effects on domestic income and welfare compared to domestic productivity growth.

JEL-codes: F15 F60 O11 (search for similar items in EconPapers)
Date: 2025-12
Note: ITI
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