APL (Ajiken Power Lunch)

Thursday, 5th of June, 12:00 to 1:15 p.m.

IDE-JETRO C22 Meeting Room 　

How does China's successful move up the manufacturing value chain affect development goals in other economies? China is not only the world's largest exporter; it has also dramatically altered the composition of its exports toward medium-high skill-intensity products. The changing product mix comes partly from industrial policies directed at skill and technology-intensive sectors, and partly from an unprecedented increase in the stock of tertiary-educated workers that those industries require. In other industrializing economies, however, the scale and composition effects of China's success may in the medium run move labor demand toward blue-collar occupations, thereby depressing the skill premium and reducing individual incentives to continue schooling. We use the GTAP model of world economy and trade to simulate the effects of these China's manufacturing transformation on production, trade and skill premia in other middle-income industrializers. We find large effects, especially in Asian regional economies whose skills endowments and product mixes are most similar to China. For many such countries, low-skill manufacturing and primary sectors expand and skill premia decline. We quantify welfare changes transmitted through domestic product and labor markets, discuss longer-run development prospects, and explore possible policy responses.

Ian Coxhead (IDE-JETRO and University of Wisconsin-Madision)

Toshitaka Gokan