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The International Effects of China's Growth, Trade and Ecucation Booms

Richard Harris, Peter Robertson () and Jessica Xu
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Jessica Xu: The University of New South Wales

No 10-04, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: China’s international trade flows have increased by 500% since 1992, far outstripping GDP growth. Likewise tertiary education enrollments have increased by 300%. We simulate these changes using a multi-sector growth model of the Chinese and USA economies. A decade of trade biased growth in China is found to have a large effect on the USA economy – raising GDP approximately 3-4.5 percentage points. We also show that the trade bias in China’s growth accounts for more than half of the observed growth in tertiary enrolments in China. In contrast neutral growth has practically no effect on USA incomes or China’s stock of skilled labour. Finally the simulations reveal that China’s education boom per se has practically no long run impact on the USA economy. The results thus indicate that the pattern of productivity growth in exports sectors, as might be caused by falling trade costs, has been critical in transmitting benefits of Chinese growth to the world economy. They also point to an important link between falling trade costs and human capital formation.

Keywords: Economic Growth; China; Human Capital; Trade Costs (search for similar items in EconPapers)
Pages: 57 pages
Date: 2010
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-tra
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