nep-cna New Economics Papers
on China
Issue of 2007‒08‒27
24 papers chosen by
Zheng Fang
Ohio State University

  1. Outsourcing and Trade Imbalances: The U.S: - China Case By Henryk Kierzkowski; Lurong Chen
  2. Does the Chinese Interest Rate Follow the US Interest Rate? By Yin-wong Cheung; Dickson Tam; Matthew S. Yiu
  3. Application of the Input-Output Decomposition Technique to China's Regional Economies By Meng, Bo; Chao, Qu
  4. Strengthening China ' s technological capability By Yusuf, Shahid; Nabeshima, Kaoru
  5. China's Rapid Growth, Yuan Misalignment and Global Imbalances By Tony Makin
  6. Appreciating the Renminbi By Rod Tyers; Iain Bain
  7. The Political Economy of China's Aid Policy in Africa By Gernot Pehnelt
  8. Macro Regime and Economic Growth in China By Yuwen Dai
  9. Specialization and adjustment during the growth of China and India : the Latin American experience By Rubiano, Eliana; Olarreaga, Marcelo; Lederman, Daniel
  10. The Illusion of Precision and the Role of the Renminbi in Regional Integration By Yin-wong Cheung; Menzie D. Chinn; Eiji Fujii
  12. Fiscal Decentralization, Chinese Style: Good for Health Outcomes? By Uchimura, Hiroko; Jütting, Johannes
  13. China's Economic Growth and its Real Exchange Rate By Rod Tyers; Jane Golley; Bu Yongxiang; Ian Bain
  14. Projected Economic Growth in China and India: The Role of Demographic Change By Rod Tyers; Jane Golley; Ian Bain
  15. Financial reforms in China and India: A comparative analysis By Wendy Dobson
  16. Making the transition from imitation to innovation: An enquiry into the technological capabilities of China's firms By Wendy Dobson; A. E. Safarian
  17. A Tale of Two Countries: Openness and Growth in China and India By Chee Kian Leong
  18. The growth of China and India in world trade : opportunity or threat for Latin America and the Caribbean? By Soloaga, Isidro; Olarreaga, Marcelo; Lederman, Daniel
  19. A Dynamic Growth Model for Flows of Foreign Direct Investment By Yi-Hui Chiang; Yiming Li; Chih-Young Hung
  20. Industrial Networks between China and the Countries of the Asia-Pacific Region By Kuwamori, Hiroshi; Okamoto, Nobuhiro
  21. Behavior Equilibrium Exchange Rate and Misalignment of Renminbi: A Recent Empirical Study By Jinzao Chen
  22. Painful Transitions: The Impact of Economic Growth and Government Policies on Hong Kong's 'Chinese' Banks, 1945-70 By Leo F. Goodstadt
  23. Currency Appreciation and Current Account Adjustment By Michael B. Devereux; Hans Genberg
  24. Not Dutch Disease, It's China Syndrome By Macdonald, Ryan

  1. By: Henryk Kierzkowski; Lurong Chen
    Date: 2007–06
  2. By: Yin-wong Cheung (University of California, Santa Cruz); Dickson Tam (Hong Kong Institute for Monetary Research); Matthew S. Yiu (Hong Kong Institute for Monetary Research)
    Abstract: One argument for floating the Chinese renminbi (RMB) is to insulate China¡¦s monetary policy from the US effect. However, we note that both theoretical considerations and empirical results do not offer a definite answer on the link between exchange rate arrangement and policy dependence. We examine the empirical relevance of the argument by analyzing the interactions between the Chinese and US interest rates. Our empirical results, which appear robust to various assumptions of data persistence, suggest that the US effect on the Chinese interest rate is quite weak. Apparently, even with its de facto peg to the US dollar, China has alternative measures to retain its policy independence and de-link its interest rates from the US rate. In other words, the argument for a flexible RMB to insulate China¡¦s monetary policy from the US effect is not substantiated by the observed interest rate interactions.
    Keywords: Policy Dependence, Interest Rate Interactions, Exchange Rate Regime
    JEL: F33 E5 G15
    Date: 2006–12
  3. By: Meng, Bo; Chao, Qu
    Abstract: Structural decomposition techniques based on input-output table have become a widely used tool for analyzing long term economic growth. However, due to limitations of data, such techniques have never been applied to China's regional economies. Fortunately, in 2003, China's Interregional Input-Output Table for 1987 and Multi-regional Input-Output Table for 1997 were published, making decomposition analysis of China's regional economies possible. This paper first estimates the interregional input-output table in constant price by using an alternative approach: the Grid-Search method, and then applies the standard input-output decomposition technique to China's regional economies for 1987-97. Based on the decomposition results, the contributions to output growth of different factors are summarized at the regional and industrial level. Furthermore, interdependence between China's regional economies is measured and explained by aggregating the decomposition factors into the intraregional multiplier-related effect, the feedback-related effect, and the spillover-related effect. Finally, the performance of China's industrial and regional development policies implemented in the 1990s is briefly discussed based on the analytical results of the paper.
    Keywords: Input-Output, Decomposition, Economic growth, China’s regional economies, China, Local economy, Imput-output tables
    JEL: C67 C82 O40 R15
    Date: 2007–04
  4. By: Yusuf, Shahid; Nabeshima, Kaoru
    Abstract: China is increasing its outlay on research and development and seeking to build an innovation system that will deliver quick results not just in absorbing technology b ut also in pushing the technological envelope. China ' s spending on R & D rose from 1.1 percent of GDP in 2000 to 1.3 percent of GDP in 2005. On a purchasing power parity basis, China ' s research outlay was among the world ' s highest, far greater than that of Brazil, India, or Mexico. Chinese firms are active in the fields of biotechnology, pharmaceuticals, alternative energy sources, and nanotechnology. This surge in spending has been parallel by a sharp increase in patent applications in China, with the bulk of the patents registered in the areas of electronics, information technology, and telecoms. However, of the almost 50,000 patents granted in China, nearly two-thirds were to nonresidents. This paper considers two questions that are especially important for China. First, how might China go about accelerating technology development? Second, what measures could most cost-effectively deliver the desired outcomes? It concludes that although the level of financing for R & D is certainly important, technological advance is closely keyed to absorptive capacity which is a function of the volume and quality of talent and the depth as well as the heterogeneity of research experience. It is also a function of how companies maximize the commercial benefits of research and development, and the coordination of research with production and marketing.
    Keywords: Technology Industry,Tertiary Education,E-Business,ICT Policy and Strategies,Agricultural Knowledge & Information Systems
    Date: 2007–08–01
  5. By: Tony Makin
    Abstract: This paper develops a new international monetary framework for analysing the domestic and international repercussions of China’s exchange rate policy in the context of its rapid development. This straightforward framework reveals that misalignment of the yuan against major currencies artificially assists China’s output growth, contributes to global imbalances and limits household consumption, slowing the rise in living standards. Meanwhile, China’s Western trading partners, most notably the United States and the European Union, simultaneously experience external deficits, lower output and saving due to exchange rate misalignment.
    Keywords: output, expenditure, economic development, exchange rate misalignment, trading partners, global imbalances
    Date: 2007–06
  6. By: Rod Tyers; Iain Bain
    Abstract: International pressure to revalue China’s currency stems in part from the expectation that rapid economic growth should be associated with a real exchange rate appreciation. This hinges on the Balassa-Samuelson hypothesis under which growth stems from improvements in traded sector productivity that cause wages and non-traded prices to rise. Yet, while evidence on China’s productivity and prices supports this hypothesis, its real exchange rate has as yet shown no long run tendency to appreciate. The use of a global numerical model allows extensions of the hypothesis, including failures of the law of one price for tradable goods, which point to WTO accession trade reforms and China’s high saving rate as key depreciating forces since the late 1990s. The same model is then applied to the implications of premature RMB appreciation. It is shown that, unless this is achieved in association with the repatriation of foreign reserves, which would require thus far unavailable financial depth in the Chinese economy, unilateral RMB appreciation would be destructive of both Chinese and global interests.
    JEL: C68 C53 E27 F21 F43 F47 O11
    Date: 2007–07
  7. By: Gernot Pehnelt (School of Busniess and Economics, Friedrich-Schiller-University Jena, Germany.)
    Abstract: In recent years, China has become a major power on the African continent, not only with respect to trade and investment, but also as a donor of development aid. Although there is no accurate measure of the exact size of China’s aid program, since China rather underestimates the volume in official statistics, estimates on the basis of press releases, official announcements and assessments of major projects in Africa suggest that China has already overtaken the World Bank in lending to Africa. In this article, we analyze China’s aid policy in Africa from a political economy perspective. We show that China is using (tied) aid and loans in order to reach specific economic and political goals and that Beijing has been quite successful in doing so. The impressing success of China in getting access to African countries can be explained by comparative advantages of the People’s Republic, especially in unstable nations and "rough" states. China’s engagement in Africa causes some serious problems with traditional donors. We discuss these conflicts and provide a critical assessment of China’s role in Africa. Finally, we discuss the policy implications for the donor community.
    Keywords: China, Africa, development aid, political economy
    JEL: O16 O19 F35 F50
    Date: 2007–08–22
  8. By: Yuwen Dai
    Abstract: In this paper, we investigate the relationship between Chinese macroeconomic policy and economic growth, and examine how the choice of macroeconomic regime affects economic performance in China. An open-economy model is developed for this purpose. It is a three-sector “almost small" open-economy macroeconomic model, with asset markets and forward-looking agents. This open-economy model is then adopted to analyse the implications of both domestic and external growth shocks to the Chinese economy under two alternative macroeconomic policy regimes. These policy regimes have two extreme assumptions on the exchange rate, with differing degrees of financial capital mobility. The simulation results show that greater flexibility in the exchange rate regime allows the central bank to conduct independent monetary policy in the Chinese economy, the benefit from which increases as financial capital becomes more internationally mobile. Most growth shocks cause an expansion in the real GDP level, and there is a deflation in the price level and depreciation in the real exchange rate when the economy operates a floating exchange rate regime with high financial capital mobility. Overall, the expansionary effects in this macroeconomic environment will be beneficial to the Chinese economy.
    Keywords: Macroeconomics, Economic Growth, Monetary Policy, Exchange Rate, Capital Mobility, Chinese Economy, Computable General Equilibrium (CGE) Modelling
    Date: 2007–06
  9. By: Rubiano, Eliana; Olarreaga, Marcelo; Lederman, Daniel
    Abstract: This paper examines the extent to which the growth of China and India in world markets is affecting the patterns of trade specialization in Latin American economies. The authors construct Vollrath ' s measure of revealed comparative advantage by 3-digit ISIC sector, country, and year. This measure accounts for both imports and exports. The empirical analyses explore the correlation between the revealed comparative advantage of Latin America and the two Asian economies. Econometric estimates suggest that the specialization pattern of Latin A-with the exception of Mexico-has been moving in opposite direction of the trade specialization pattern of China and India. Labor-intensive sectors (both unskilled and skilled) probably have been negatively affected by the growing presence of China and India in world markets, while natural resource and scientific knowledge intensive sectors have probably benefited from China and India ' s growth since 1990.
    Keywords: Free Trade,Economic Theory & Research,Trade Policy,Water and Industry,Agricultural Knowledge & Information Systems
    Date: 2007–08–01
  10. By: Yin-wong Cheung (University of California, Santa Cruz); Menzie D. Chinn (University of Wisconsin, Madison and NBER); Eiji Fujii (University of Tsukuba)
    Abstract: The debate on renminbi (RMB) revaluation has not subsided, despite the policy change announced by the Chinese authorities in July 2005. In this chapter, we show that the evidence of RMB undervaluation may not be as strong as it appears. Specifically, depending on the method used, the evidence ranges from slight overvaluation to undervaluation. Even in the case of undervaluation, the results are not significant in the statistical sense. We also note that China is playing an important economic role in Asia and has established a complex production and trade network with its neighboring economies, which complicates the calculation of the equilibrium exchange rate. Thus, a change in Chinese exchange rate policy in response to demands from foreign countries and short-run considerations may have undesirable effects on the economies of China and the Asian region.
    Keywords: exchange rate policy, regional integration, market integration, purchasing power parity, Balassa-Samuelson, currency misalignment.
    JEL: F31 F41
    Date: 2006–12
  11. By: Puah, Chin-Hong; Kueh, Jerome Swee-Hui; Lau, Evan
    Abstract: The relationship between Foreign Direct Investment (FDI) and Gross Domestic Products (GDP) had become the centre piece of recent researches in identifying the short run and long run implications between the two variables. Using the hypotheses of FDI led GDP and GDP led FDI as theoretical framework, this study intends to analyze the implications of the rise of China towards the ASEAN-5 countries, namely Indonesia, Malaysia, the Philippines, Singapore and Thailand from the perspective of FDI and GDP. The cointegration and vector error correlation estimate test results showed that there is a significant positive long run relationship between FDI of China and GDP of ASEAN-5. However, we failed to detect any short run causal relationship among the variables under study.
    Keywords: Foreign Direct Investment; Gross Domestic Product; ASEAN-5; China
    JEL: F10
    Date: 2007–08–20
  12. By: Uchimura, Hiroko; Jütting, Johannes
    Abstract: This study analyzes the effect of fiscal decentralization on health outcomes in China using a panel data set with nationwide county-level data. We find that counties in more fiscal decentralized provinces have lower infant mortality rates compared to those counties in which the provincial government retains the main spending authority, if certain conditions are met. Spending responsibilities at the local level need to be matched with county government’s own fiscal capacity. For those local governments that have only limited revenues, their ability to spend on local public goods such as health care depends crucially upon intergovernmental transfers. The findings of this study thereby support the common assertion that fiscal decentralization can indeed lead to more efficient production of local public goods, but also highlights the necessary conditions to make this happen.
    Keywords: Fiscal decentralization, Health outcomes, China, Fiscal policy, Decentralization, Local government, Public health
    JEL: H75 I18
    Date: 2007–07
  13. By: Rod Tyers; Jane Golley; Bu Yongxiang; Ian Bain
    Abstract: The recent influx of financial capital to China implies expectations of continued real appreciation and, indeed, rapid expansion had previously led to real appreciations elsewhere in East Asia. In a world of open economies and differentiated traded goods, however, development-related productivity and endowment growth shocks tend to cause real depreciations, the principal exception being the Balassa case where non-traded service sectors are large and productivity shocks are restricted to traded sectors. China is a special case amongst developing countries in that its labour force is likely to decline in future and this will place upward pressure on real wages and its real exchange rate. This paper assesses the magnitudes of the various links between China’s growth performance and its real exchange rate using an adaptation of the GTAP-Dynamic global economic model in which a full demographic sub-model is incorporated. A baseline “business as usual” simulation is constructed to 2030, wherein China’s growth rate slows considerably due to ageing and slower labour force growth. Comparator simulations are then constructed for cases in which fertility policy is changed, sectoral factor productivity is higher and financial reform reduces the investment interest premium. China’s real exchange rate realignments are examined in each case, the results suggesting the current appreciating trend may be temporary, with depreciating forces appearing to dominate in the long term.
    JEL: C53 C68 E27 F21 F43 F47 J11 O11
    Date: 2006–11
  14. By: Rod Tyers; Jane Golley; Ian Bain
    Abstract: Within the next decade, China’s labour force will begin to contract, while that of India will expand faster than its population. Relative labour abundance will bring higher capital returns and an increasing share of global FDI to India. Yet China may relax its One Child Policy further and India’s fertility could follow the pattern elsewhere in Asia and decline faster than expected. These linkages are explored using a global demographic sub-model that is integrated with an adaptation of the GTAP-Dynamic global economic model in which regional households are disaggregated by age and gender. Even with a two-child-policy, China’s growth is projected to slow in future with India becoming the fastest growing economy in the world on the strength of its continued population expansion. While GDP depends positively on fertility and per capita income negatively in both countries, the price of more GDP growth in terms of lost per capita income is lower in China than in India, a result that depends critically on India’s initially higher fertility, its higher youth dependency and the age-gender pattern of its participation rates. India therefore has considerably more to gain, at least in per capita terms, from further reducing its fertility
    JEL: C68 E27 F43 J11 O53
    Date: 2007–11
  15. By: Wendy Dobson (International Tax Program, Rotman School of Management, University of Toronto)
    Abstract: This paper surveys financial reforms in the world’s two most populous and rapidly-growing economies. The contribution of financial systems to long term growth through the efficient mobilization and allocation of scarce capital is well documented in the literature. India’s financial system is popularly perceived to be better developed than China’s, yet they share two significant weaknesses: under-developed corporate bond markets and bank-dominated financial systems. High levels of state ownership of banks are associated with misdirected lending and high costs of intermediation. The paper examines the institutional frameworks that determine incentives in these sectors and marshals empirical evidence that historical decisions and insufficient market reform suggest performance problems persist. These problems will become more evident when growth slows; indeed a crisis may be necessary to force change since prevailing high economic growth rates in spite of the weaknesses undermine the case for deeper reforms.
    Keywords: comparative analysis; financial systems; China and India
    JEL: P O16 G20
    Date: 2007
  16. By: Wendy Dobson; A. E. Safarian (Rotman School of Management, University of Toronto)
    Abstract: We examine evidence on whether and how the Chinese economy will make the transition from imitation and labor intensive production to innovation as the source of sustained long term growth. We note the risk of obstacles to innovation such as outdated institutions and incentive systems that cause the “disequilibrium trap” in which growth slows down. We review existing literatures that focus on macroeconomic indicators, institutions and the behavior of firms and which suggests that China can make the transition, but progress depends on addressing significant institutional weaknesses including the weak legal system, continued reliance on imitation and on international rather than domestic supply chains, and partial linkages between the growing public science and technology base and industry. Much depends on the behavior of firms. We study such behavior in our results of a firm-level survey. Interviews with privately-owned SME producers in five industries designated as “high tech” shed light on how they are learning by examining three main inputs to their innovation processes: learning with respect to organizational, marketing, sourcing or production processes; education and skills development; and changes in the quantity and types of R&D. Most of the firms are less than 20 years old and focus on the domestic product market, adapting and learning as a result of intense competitive pressures, demanding customers, interaction with research institutes and the use of international linkages, foreign acquisitions or foreign partners.
    Keywords: China. Technological capabilities of firms. Catchup. Transition to innovation economy.
    Date: 2007–08
  17. By: Chee Kian Leong
    Abstract: The policy by China and India to open their markets to international trade has been touted as the reason for their phenomenal growth. This paper investigates the impact of opening up the China and Indian economy on economic growth in these countries using new panel data sets for both the national economies and the regional economies of China. The policy change to a more liberalized economy is explicitly identified using instrumental variables. The results provide support that export growth does have a positive and statistically significant effect on economic growth in these countries. However, the growth rates of these countries are export and FDI inelastic, in the sense that a one percentage point increase in growth rate of export or FDI will have a less than one percentage point increase in economic growth rate of these countries. In the case of the Chinese regions, the presence of export processing zones may exert positive effect on the regional growth rate but the increase in regional growth is even more export inelastic than at the national level. The results dispel the popular view that adopting a policy of more openness in the economy has a “multiplier” effect on economic growth. Of the two phases of liberalization in both countries, the second stage is statistically significant. One possible reason is that the scale of liberalization is greater in the second phase. Additionally, increasing the number of SEZs has very negligible effect on economic growth. Taken together, these results suggest that what contributes to greater growth is a greater scale of liberalization, rather than increasing the number of SEZs.
    Date: 2007–06
  18. By: Soloaga, Isidro; Olarreaga, Marcelo; Lederman, Daniel
    Abstract: This paper studies the relationship between the growth of China and India in world merchandise trade and Latin American and Caribbean commercial flows from two perspectives. First, the authors focus on the opportunity that China and India ' s markets have offered Latin American and Caribbean exporters during 2000-2004. Second, empirical analyses examine the partial correlation between Chinese and Indian bilateral trade flows and Latin American and Caribbean trade with third markets. Both analyses rely on the gravity model of international trade. Econometric estimations that control for the systematic correlation between expected bilateral trade volumes and the size of their regression errors, as well as importer and exporter fixed effects and year effects, provide consistent estimates of the relevant parameters for different groups of countries in Latin America and the Caribbean. Results suggest that the growth of the two Asian markets has produced large opportunities for Latin American and Caribbean exporters, which nevertheless have not been fully exploited. The evidence concerning the effects of Chinese and Indian trade with third markets is not robust, but there is little evidence of negative effects on Latin American and Caribbean exports of non-fuel merchandise. In general, China ' s and to a large extent India ' s growing presence in world trade has been good news for Latin America and the Caribbean, but some of the potential benefits remain unexploited.
    Keywords: Economic Theory & Research,Free Trade,Currencies and Exchange Rates,Trade Policy,Markets and Market Access
    Date: 2007–08–01
  19. By: Yi-Hui Chiang; Yiming Li; Chih-Young Hung
    Abstract: In this work, we for the first time study the dynamic flows of the foreign direct investment (FDI) with a dynamic growth theory. We define the FDI flow as a process which transmits throughout a given social system by way of diverse communication channels. In model formulation, seven assumptions are thus proposed and the foreign capital policy of the host country is considered as an external influence; in addition, the investment policy of the investing country is modeled as an internal influence. Classification of influences is mainly according to the operational strategy as well as the consideration of economical/financial factors. The dynamic model of FDI flow is a differential equation which is solved numerically and verified with collected realistic data. Application of the developed model to explore, taking the electronics industry in Taiwan as an example, Taiwanese direct investment (TDI) in China (i.e. FDI flows from Taiwan to China) since 2001 is conducted. Our preliminary results successfully account for the dynamics of FDI flow for different amount of TDI outflows. It is found that the internal influence dominates the growth of TDI flow from Taiwan to China during 2001-2006.
    Keywords: Foreign direct investment, dynamic flow theory, growth model, and numerical simulation
    Date: 2007–06
  20. By: Kuwamori, Hiroshi; Okamoto, Nobuhiro
    Abstract: This paper investigates the changes in the structures of industrial networks that have occurred in the Asia-Pacific region in line with the rapid growth of the Chinese economy. Analyses using international input-output tables revealed that during the 1990s, there was a significant increase in the dependence of Asian countries’ manufacturing industries, such as textiles and electronics, on China’s industries, though industries in Japan and the United States remain important as the main suppliers of industries in Asian countries.
    Keywords: Input-output analysis, Backward linkage, Industrial network, Asia, China, Japan, United States, Input-output tables, Manufacturing industries
    JEL: D57 R15
    Date: 2007–06
  21. By: Jinzao Chen
    Abstract: This paper employs the behavioral equilibrium exchange rate (BEER) model to estimate the equilibrium real exchange rate of Renminbi (RMB) and the exchange rate misalignment in China, which covers the period from 1994q1 to 2006q2. Using the most precise and recent data, the main findings of the paper are that (1) since 1994q1, RMB equilibrium exchange rate has exhibited a steady appreciation, but from the 1999q3 to the recent period, it started to depreciate. And (2) that RMB real exchange rate has been under-valuated during the most part of sample period, but this misalignment has a trend to become smaller and small, and in recent after-reform period, a small degree of over-evaluation replaces this under-valuation.
    Keywords: Behavior equilibrium exchange rate, cointegration, misalignment, Renminbi
    JEL: F31 F32 F41 C32
    Date: 2007–06
  22. By: Leo F. Goodstadt (University of Dublin)
    Abstract: Hong Kong¡¦s Chinese banks survived the loss in 1949 of their traditional role in serving the trade and currency needs of Mainland clients and the restrictions imposed on the local gold market. But they allowed foreign banks to overtake them in financing the new manufacturing sector in Hong Kong. Using unpublished archival material, this paper traces how official banking policies encouraged them to cling to their traditional business model until forced to change by a collapse in the property market.
    Date: 2006–11
  23. By: Michael B. Devereux (University of British Columbia); Hans Genberg (Hong Kong Monetary Authority, Hong Kong Institute for Monetary Research)
    Abstract: A central aspect of the recent debate on global imbalances and the US current account deficit is the role of the exchange rate peg being followed by China and other Asian economies. While one view has stressed the need for Asian currency appreciation, another focuses on the importance of fiscal adjustment and more generally adjustment in relative savings rates in the US and Asian economies. This paper develops a simple two-region open economy macroeconomic model to analyze the alternative impacts of currency appreciation and fiscal adjustment on the current account. We stress a number of structural features of emerging Asian economies that may make currency appreciation an ineffective means of current account adjustment relative to fiscal policy changes. In addition, we note that there may be a welfare conflict between regions on the best way to achieve adjustment.
    Keywords: Current Account, Currency Appreciation
    JEL: E52 E58 F41
    Date: 2006–12
  24. By: Macdonald, Ryan
    Abstract: This paper empirically investigates how the Canadian economy has evolved following the rise in commodity prices and appreciation of the Canadian dollar that began in 2003. The adjustment in the manufacturing industry has garnered the greatest attention because it has borne the brunt of job losses. However, the adjustment of the manufacturing industry has not been straightforward. Rather, a complex reallocation has been taking place within manufacturing that has been predominantly due to the integration of emerging nations into the global economy. The increased commodity prices and falling manufactured prices caused by this integration have affected durable and non-durable manufacturing industries differently. Non-durable manufacturers have tended to see their competitiveness eroded and their output has tended to fall. Durable manufacturers, on the other hand, have increased output in response to the resource boom and increased demand in general. The result has been stable manufacturing output overall, accompanied by a re-orientation of manufacturing output away from non-durables and toward durables. The appreciated dollar and higher commodity prices have also led to a more widespread industrial reallocation in Canada. The higher commodity prices have started a resource boom, particularly in Alberta. The boom has led to rising resource industry employment, while manufacturing employment declined, and to rising service-sector employment. It has contributed to inter-provincial migration, and has greatly increased the purchasing power of Canadian incomes as terms of trade have improved.
    Keywords: International trade, Labour, Manufacturing,
    Date: 2007–08–16

This nep-cna issue is ©2007 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.