Trade, structural transformation and productivity growth in China

Abstract

This paper studies the recent experience of the Chinese economy from the perspective of a model with structural transformation and trade lib- eralization. The final objective is to quantify the contributions of the main drivers of Chinese experience, namely: the high investment rate, the strong productivity growth in each sector, the reallocation of labor across sectors and public sector expenditures. We construct a standard dynamic general equilibrium model of structural transformation for the Chinese economy, but add government and an external sector.