NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ching-mu Chen

School of Business Administration
Zhongnan University of Economics and Law
Wuhan, Hubei
China

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Zhongnan University of Economics and Law

NBER Working Papers and Publications

November 2019Trade Wars, Technology and Productivity
with Wan-Jung Cheng, Shin-Kun Peng, Raymond Riezman, Ping Wang: w26468
If international trade is strictly trade in intermediate goods, would the common presumption, that small, less developed economies (the South) lose from trade wars still be true? We address this question by constructing a dynamic general equilibrium model in which the North and the South trade technology-embodied intermediate goods. We show that the detrimental effects of the trade war are mitigated by the fact that producers in the South can adjust their choice of imported intermediate goods and their investment in domestic technologies. We establish sufficient conditions under which the steady-state trade equilibrium length of the production line and the range of domestic production in the South both expand in response to a tariff war. It thereby creates a novel channel of scale-scope tr...
 
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