NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

China's Potential Future Growth and Gains from Trade Policy Bargaining: Some Numerical Simulation Results

Chunding Li, John Whalley

NBER Working Paper No. 17826
Issued in February 2012
NBER Program(s):   ITI

Numerical simulation analysis of bargaining solutions is little developed in existing literature. Here we use a multi country, single period numerical general equilibrium model which captures China and her major trading partners and examine the outcomes of trade policy bargaining solutions (bargaining over tariffs and financial transfers) over time as China grows more rapidly than her trade partners. We compute gains relative to non-cooperative Nash equilibria for a range of model parameterizations. This yields a measure of both absolute and relative gain to China from bargaining. We calibrate our model to base case data for 2008 and use a model formulation where there are heterogeneous goods across countries. The gains from trade bargaining accrue more heavily to other countries when we use 2008 data rather than later year data.

We then consider the impacts out into the future of different country growth rates which sharply increases China's relative size. Our objective is to assess how China's gains from bargaining change over time; whether they grow at a faster rate than GDP growth and for which parameterizations. Our simulation results indicate that China's welfare gain from trade bargaining will increase over time if countries keep their present GDP growth rates for several decades, but there are major difference when using different bargaining solution concepts. These differences have not been noted in existing literature but have an intuitive explanation. Our results also indicate that if China jointly bargains along with India, Brazil and other developing countries with the OECD, China's gain will further increase. Bargaining gains are also sensitive to country size. When we use PPP to adjust China's relative GDP size; China's trade bargaining welfare gain increases by about 37%.

download in pdf format
   (233 K)

email paper

This paper is available as PDF (233 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17826

Published: Li, Chunding & Whalley, John, 2014. "China's potential future growth and gains from trade policy bargaining: Some numerical simulation results," Economic Modelling, Elsevier, vol. 37(C), pages 65-78. citation courtesy of

Users who downloaded this paper also downloaded these:
Chi, Freeman, and Li w17721 Adjusting to Really Big Changes: The Labor Market in China, 1989-2009
Keller, Li, and Shiue w17754 Shanghai's Trade, China's Growth: Continuity, Recovery, and Change since the Opium War
Li and Whalley w18090 China and the TPP: A Numerical Simulation Assessment of the Effects Involved
Allen, Qian, Zhang, and Zhao w17828 China's Financial System: Opportunities and Challenges
Feenstra, Ma, Neary, and Rao w17729 Who Shrunk China? Puzzles in the Measurement of Real GDP
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us