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Title:International trade and its effects on economic growth in China PDF Logo
Authors:Sun, Peng
Heshmati, Almas
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5151
Abstract:International trade, as a major factor of openness, has made an increasingly significant contribution to economic growth. Chinese international trade has experienced rapid expansion together with its dramatic economic growth which has made the country to target the world as its market. This research discusses the role of international trade in China's economic growth. It starts with a review of conceptions as well as the evolution of China's international trade regime and the policy that China has taken in favor of trade sectors. In addition, China's international trade performance is analyzed extensively. This research then evaluates the effects of international trade on China's economic growth through examining improvement in productivity. Both econometric and non-parametric approaches are applied based on a 6-year balanced panel data of 31 provinces of China from 2002 to 2007. For the econometric approach, a stochastic frontier production function is estimated and province specific determinants of inefficiency in trade identified. For the non-parametric approach, the Divisia index of each province/region is calculated to be used as the benchmark. The study demonstrates that increasing participation in the global trade helps China reap the static and dynamic benefits, stimulating rapid national economic growth. Both international trade volume and trade structure towards high-tech exports result in positive effects on China's regional productivity. The eastern region of China has been developing most rapidly while the central and western provinces have been lagging behind in terms of both economic growth and participation in international trade. Policy implications are drawn from the empirical results accordingly.
Subjects:international trade
economic growth
China
panel data
stochastic frontier
JEL:C23
D24
F10
O24
R58
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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