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Structural Change and Slowdown of International Trade

Ryan Monarch, Jing Zhang () and Logan Lewis ()

No 1542, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: As countries get richer, they consume a larger share of their income in the services or less-traded sector. This structural change pattern is one of the most salient features of economic development. Consequently, as the world economy becomes more services oriented, it will become "less open" in terms of total trade over GDP. Thus structural change impacts long-run global trade. This paper quantitatively studies the impact of structural change on global trade, and we find that the world trade over GDP ratio would have been about 17 percentage points higher if structural change had not happened. We find little evidence that this drag on trade growth has become more pronounced in recent years.

Date: 2017
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