A Global View of Productivity Growth in China
How does a country's productivity growth affect worldwide real incomes through international trade? In this paper, we take this classic question to the data by measuring the spillover effects of China's productivity growth. Our framework features traditional terms-of-trade effects and new trade home market effects as suggested by the theoretical literature and works from a reference point which perfectly matches industry-level trade. Focusing on the years 1995 to 2007, we find that the cumulative welfare effect on individual regions ranges between -1.2 percent and 3.6 percent and only 3.0 percent of the worldwide gains of China's productivity growth accrue to the rest of the world.
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This paper was revised on October 27, 2011