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on China |
| By: | Hanming Fang (University of Pennsylvania and NBER); Ming Li (Chinese University of Hong Kong); Guangli Lu (Chinese University of Hong Kong) |
| Abstract: | We decode China’s industrial policies from 2000 to 2022 by employing large language models (LLMs) to extract and analyze rich information from a comprehensive dataset of 3 million documents issued by central, provincial, and municipal governments. Through careful prompt engineering, multistage extraction and refinement, and rigorous verification, we use LLMs to classify the industrial policy documents and extract structured information on policy objectives, targeted industries, policy tones (supportive or regulatory/suppressive), policy tools, implementation mechanisms, and intergovernmental relationships, etc. Combining these newly constructed industrial policy data with micro-level firm data, we document four sets of facts about China’s industrial policy that explore the following questions: What are the economic and political foundations of the targeted industries? What policy tools are deployed? How do policy tools vary across different levels of government and regions, as well as over the phases of an industry’s development? What are the impacts of these policies on firm behavior, including entry, production, and productivity growth? We also explore the political economy of industrial policy, focusing on top-down transmission mechanisms, policy persistence, and policy diffusion across regions. Finally, we document spatial inefficiencies and industry-wide overcapacity as potential downsides of industrial policies. |
| Keywords: | Large Language Models; Industrial Policy; Policy Diffusion; Revealed Comparative Advantage; Overcapacity |
| JEL: | L52 O25 C55 |
| Date: | 2025–05–12 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:25-012 |
| By: | Gopalakrishnan , Badri Narayanan (Infinite Sum Modelling LLC); Domingo , Ma. Veronica (Asian Development Bank); Basu Das , Sanchita (Asian Development Bank) |
| Abstract: | The study analyzes the impact of changes in outbound tourism from the People’s Republic of China (PRC) on the subregions of Asia and the Pacific—Southeast Asia, East Asia, South Asia, Central and West Asia, and the Pacific. It conducts three simulations to understand the broader economic and sectoral impacts of: 1) the expansion of outbound tourism from the PRC from 2017 to 2018; 2) its slump in 2020 due to the COVID-19 pandemic; and 3) its cautious recovery from 2021 to 2022. The study broadly finds that gross domestic product (GDP) and export gains for Asia and the Pacific subregions are notable when the number of outbound tourists is high, i.e., prior to the pandemic and later in 2021–2022, and again when the PRC slowly opened its borders. Conversely, GDP and export losses are notable when outbound tourism fell in 2020 due to pandemic. Sectoral impacts are heterogenous, and the impact on exports is not necessarily aligned with that on GDP, because there are trade diversions and sectoral resource diversions that mute the impact going from exports to GDP. Given these dependencies on the PRC’s outbound tourism, the study suggests that economies in Asia and the Pacific consider diversifying their source markets through travel facilitation and better connectivity. |
| Keywords: | outbound tourism; exports; GDP; sectors; GTAP; Asia and the Pacific; People’s Republic of China |
| JEL: | C68 F14 Z30 |
| Date: | 2025–05–21 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:0782 |
| By: | Cheng, Ruoran |
| Abstract: | The Great Divergence has arguably been one of the most important debates in the field of economic history over the past two decades. This article contributes to this ongoing discussion from a novel perspective, specifically focusing on transportation conditions. Utilizing travel route books published since 16th century China, I reconstructed the national trade transport network of China during the Ming and Qing dynasties (14th to 19th centuries) and estimated transport costs and speeds in the Yangtze region during the late 17th and 18th centuries. These estimates were then compared with those of England for the same period. The findings reveal that, in the late 17th century, transport costs and speeds in the Yangtze region of China were comparable to those in England. However, a divergence emerged after 1700. This timing of divergence in transportation between the Yangtze region and England supports the strand of literature proposing that The Great Divergence began around 1700. |
| JEL: | N75 N73 O18 R41 |
| Date: | 2024–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125855 |
| By: | Lin, Zhuoer; Qian, Yuting; Gill, Thomas M.; Hou, Xiaohui; Allore, Heather; Chen, Shanquan; Chen, Xi |
| Abstract: | Assistance with daily activities is crucial for persons living with dementia and disabilities, yet many face significant challenges in accessing adequate care and support. Using harmonized longitudinal survey data (2012-2018) from the United States, England, 18 European countries and Israel, and China, we found that at least one-fifth of persons with dementia and disabilities received no personal assistance for basic or instrumental activities of daily living (ADL/IADL), regardless of regional development level. Care gaps were widespread across both ADL and IADL limitations, as well as for informal and formal care. Disparities were evident, with less-educated individuals more likely to lack formal care, while those living alone often lacked informal support, resulting in the absence of any care. Alarmingly, care availability showed no improvement over time. Our findings underscore the urgent need for policies to address inequities and ensure critical access to care services for this vulnerable population worldwide. |
| Keywords: | global aging, dementia, disability, ADL, IADL, unmet need, elder care |
| JEL: | J14 J18 I11 I18 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1608 |
| By: | Wu, Ningzhu |
| Abstract: | This paper examines the role of international trade in shaping the economic development of Imperial China and Western Europe, focusing on the 50 years following the Opium War, a pivotal moment in the Great Divergence. Utilizing newly discovered primary data from Chinese Customs records, this study explores how trade dynamics—including volume, volatility, and product categories—interacted with political, institutional, and colonial factors. While trade significantly boosted industrialization in Western Europe, China’s weak institutions and colonial exploitation made it particularly vulnerable to trade fluctuations. Unlike other peripheral economies that experienced deindustrialization, China faced economic instability without industrial decline due to deteriorating trade terms. Trade, acting as an influence amplifier, magnified China’s institutional weaknesses, further deepening the divergence between China and the West. This paper contributes fresh insights into the broader impact of trade on the Great Divergence and offers practical lessons for underdeveloped regions today. |
| JEL: | N75 N73 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127152 |
| By: | Andrés Rodríguez-Clare; Mauricio Ulate; Jose P. Vasquez |
| Abstract: | We use a dynamic trade and reallocation model with downward nominal wage rigidities to quantitatively assess the economic consequences of the recent increase in the U.S. tariffs on imports from Mexico, Canada, and China, as well as the “reciprocal” tariff changes announced on “Liberation Day” and retaliatory measures by other countries. Higher tariffs trigger an expansion in U.S. manufacturing employment, but this comes at the expense of declines in service and agricultural employment, with overall employment declining as lower real wages reduce labor-force participation. For the United States as a whole, real income falls around 1% by 2028, the last year we assume the high tariffs are in effect. Importantly, our analysis disaggregates the U.S. into its 50 states, while incorporating cross-state redistribution of the tariff-generated fiscal revenue, allowing us to analyze which states gain or lose more from the shock. Around half of the states lose, with some states experiencing real income declines of more than 3%. Turning to cross-country results, some close U.S. trading partners—like Canada, Mexico, China, and Ireland—suffer the largest real income losses. |
| Keywords: | trade; Trade Dynamics; reallocation; downward nominal wage rigidity; tariffs |
| JEL: | F10 F11 F13 F16 F40 F42 |
| Date: | 2025–04–22 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:99957 |
| By: | Martin Chorzempa (Peterson Institute for International Economics); Lukas Spielberger (Centre for Security, Diplomacy and Strategy-VUB) |
| Abstract: | Despite worldwide concerns about the US dollar, the Chinese renminbi is not yet ready to be a serious contender for leading international currency status. This Policy Brief examines three of the most important Chinese approaches to increasing the renminbi's role as an international settlement currency: promote bilateral swap agreements between the People's Bank of China and other central banks; create international payment systems that do not involve the dollar, most notably the Cross-Border Interbank Payment System; and develop a central bank digital currency for alternative payment infrastructures. The authors find that Beijing's efforts fall short of posing a systemic challenge to the dollar or to infrastructures like SWIFT. Nevertheless, these approaches have enabled China to use its currency for bilateral foreign policy. US and European policymakers should consider countering or attenuating these efforts, even though they have had limited success in increasing renminbi usage. This Policy Brief has been copublished with the Centre for Security, Diplomacy and Strategy-VUB. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:iie:pbrief:pb25-4 |
| By: | International Monetary Fund |
| Abstract: | The FSSA found that since the last FSAP in 2017, the authorities have made notable progress in strengthening financial supervision and regulation, continuously implementing international regulatory standards, and enhancing systemic risk monitoring. Due to regulatory reforms they also made important reductions, in risks arising from non-bank financial institutions. While bank capital and liquidity levels appear adequate overall, the FSAP concluded that financial stability risks are elevated. Rising vulnerabilities from the property sector downturn and widening strains in highly leveraged local government financial vehicles (LGFV) warrant attention as declining economic growth could affect credit portfolio quality and accommodative monetary policy is weakening banks’ organic profitability, with smaller banks—particularly those with riskier business models—being more vulnerable. |
| Keywords: | LGFV debt risk; emergency liquidity assistance framework; FSSA recommendation; mission to the People's Republic of China; bank capital; LGFV debt pose risk; transparency policy; LGFV risk mitigation; FSSA report; local government financial vehicles; China development bank; warrant attention; Financial Sector Assessment Program; Financial sector stability; Financial sector risk; Stress testing; Commercial banks; Global |
| Date: | 2025–04–30 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfscr:2025/100 |
| By: | Si, Yafei; Chen, Gang; Zhou, Zhongliang; Yip, Winnie; Chen, Xi |
| Abstract: | Despite growing evidence of gender disparities in healthcare utilization and health outcomes, there is a lack of understanding of what may drive such differences. We present novel evidence on the impact of physician-patient gender match on healthcare quality using the standardized patients (SPs) method in an experiment. The experiment collected interactions between standardized patients and physicians in a primary care setting in China during 2017-2018. We find that, compared with female physicians treating female SPs, female physicians treating male SPs resulted in a 23.4 percentage-point increase in correct diagnosis and a 19.0 percentage-point increase in correct drug prescriptions. Despite these substantial gains in healthcare quality, there was no significant increase in medical costs or time investment. The gains in healthcare quality were partly attributed to better physician-patient communications, but not the presence of more clinical information. More importantly, female physicians treating male SPs prescribed more unnecessary tests but fewer unnecessary drugs to balance their time commitment and costs. The results suggest the potential role of cultural gender norms and physician defensive behavior when female physicians treat male SPs. Our findings imply that improving patient centeredness may lead to significant gains in the quality of healthcare with modest costs, while reducing gender differences in care quality. |
| Keywords: | gender disparities, healthcare quality, standardized patient, experiment, China |
| JEL: | I11 I12 I14 J16 J22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1607 |
| By: | Deng, Kent; Du, Jane |
| Abstract: | It has been commonly believed that economic reforms in the post-Mao Era since 1980 have changed China from autarky to an export-oriented developmental path, accompanied by inward and cheap FDI with advanced foreign technology. This paper challenges this view with quantitative evidence and shows that China’s recent growth has depended heavily on a domestic source of capital coming from newly available household sayings, stemming from (1) state mandatory price control over food as a wage good on the one hand and (2) a fast-growing wage level due to arising labour productivity on the other. |
| Keywords: | developmental state; gradualism; saving-led growth; price overshoot; wage goods; economic transition |
| JEL: | O11 P21 P51 Q18 |
| Date: | 2024–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:122355 |
| By: | Irigoin, Alejandra; Kobayashi, Atsushi; Chilosi, David |
| Abstract: | This paper analyses a new, large dataset of silver prices, as well as silver and merchandise trade flows in and out of China in the crucial decades of the mid-19th century when the Empire was opened to world trade. Silver flows were associated with the interaction between heterogenous monetary preferences and availability of specific coins. Before the 1850s, money markets became increasingly efficient, as reliance on bills of exchange allowed exports to grow in times when sound money was in short supply. When a new standard for silver eventually emerged, there was a new peak in China’s silver imports. |
| Keywords: | China silver flows; triangular trade settlement mechanism; exchange operations; arbitrage; ‘opening of China’ |
| JEL: | E42 F33 N10 |
| Date: | 2023–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:119759 |
| By: | Ku, Hyejin (University College London); Mu, Tianrui (University College London) |
| Abstract: | This paper examines how China’s growing research capabilities impact global research universities across scientific fields. Using bibliometric data from 1980 to 2020, we assess the effects of the “China shock” on high-impact publications, novel concepts, and citation patterns. Our analysis reveals a positive net effect in Chemistry and Engineering & Materials Science (EMS), but a negative effect in Clinical & Life Sciences (CLS). In other fields, the effects are mostly positive but imprecise. We highlight the coexistence of competition and spillover effects, with their relative strength shaped by field characteristics, such as expansion potential and the quality of China’s research. |
| Keywords: | ideas, knowledge production, China shock in science, competition, spillovers |
| JEL: | J24 I23 O31 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17866 |
| By: | Guo, Jingyuan; Deng, Kent |
| Abstract: | This paper explores how changes in state capacity facilitates economic growth in an authoritarian system. This is the case of Deng Xiaoping’s systematic replacement of government officials with a new army of better-educated technocrats which uprooted Maoist revolutionary cadres. Our assumption is that post-Mao economic growth can be taken as a proxy for state capacity improvement. With a continuous treatment difference-in-differences strategy, this paper reveals that one percent increase in officials’ replacement intensity results in 1.3 percent increase in GDP in post-Mao China. Moreover, effects are robust across various technical concerns and maintain stable over a period of four decades. Furthermore, our results explain 18.05 percent of the contemporary economic disparity between China’s provinces (with intensity above and below the median). These effects can be associated with improvements in officials’ human capital which in turn rebuilt China’s fiscal capability, re-started a market-friendly industrialization, and resumed grassroots self-governing institutions. All these have been achieved without a regime change in the People’s Republic of China, hence, a ‘bloodless coup d’état’. |
| Keywords: | officials' replacement; state capacity; economic reforms; economic growth |
| JEL: | H11 O11 N45 |
| Date: | 2024–11–14 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126083 |
| By: | Yan, Zhe; Ten Brink, Tobias; Müller, Armin |
| Abstract: | Female workers in China have a de jure right to maternity benefits, as enshrined in policy and legal documents since the 1950s. This article examines why this entitlement is not always de facto guaranteed as stipulated in the legislation. We use the conceptual framework of gradual institutional change by drift to analyze how a changing context, that of marketization, undermined the effectiveness of an institution, namely the individual right to maternity benefits. We trace the historical evolution of maternity benefits and examine their outcomes in terms of coverage and benefit levels. We find that the transition from a command to a market economy led to employer noncompliance in providing benefits. Although maternity insurance was introduced in 1994 to alleviate drift, persistent employer non-compliance, and weak legal enforcement, also help explain why coverage remained uneven well into the 2010s and why this was accompanied by a decline in maternity benefit levels at the same time. In fact, linking female workers' maternity entitlements to a noncontributory insurance scheme that makes employers both contributors and distributors of maternity benefits has reinforced the employers' role and contributed to the gaps between de jure entitlement and de facto benefits. By combining historical research and interviews with quantitative data from statistical yearbooks and the China Labor Dynamics Survey, we add new insights to research on maternity benefits in China by tackling the relationship between drift and the implementation of legislation. |
| Keywords: | maternity benefits, social insurance, employers, legal entitlements, drift, China |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:udedao:317776 |
| By: | Shuhei Nishitateno (Kwansei Gakuin University and RIETI); Yasuyuki Todo (Waseda University and RIETI) |
| Abstract: | China’s Belt and Road Initiative (BRI) has led to a global proliferation of large-scale infrastructure projects. From the perspective of Western nations, the impacts of BRI infrastructure investments on economic, political, and security interests pose significant concerns. This paper examines the effects of the BRI on Japanese overseas infrastructure projects and diplomatic relations between Japan and BRI countries. Using a staggered difference-in-differences research design with a panel dataset covering 138 low- and middle-income countries from 2001 to 2020, we find that the BRI crowded out Japanese infrastructure projects and reduced political leaders’ visits from BRI countries to Japan. These effects are particularly pronounced for nations in the East Asia and the Pacific and South Asia regions, where the Japan–China competition for infrastructure investments is most intense. Furthermore, we identify the expansion of Chinese overseas infrastructure projects, particularly aid-based rather than debt-financed projects, as a key mechanism driving these effects. |
| Keywords: | Belt and Road Initiative, Overseas infrastructure investments, Diplomatic relations, China, Japan |
| JEL: | F21 P00 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2506 |
| By: | Maximiliano Dvorkin; Cassandra Marks |
| Abstract: | An analysis of the 2018-19 tariff hikes on Chinese imports suggests they affected import patterns and prices of the kind of goods subject to the duties. |
| Keywords: | tariffs; imports; trade; China |
| Date: | 2025–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00001:100000 |
| By: | Laura Alfaro; Mariya Brussevich; Camelia Minoiu; Andrea F. Presbitero |
| Abstract: | Finding new international suppliers is costly, so most importers source inputs from a single country. We examine the role of banks in mitigating trade search costs during the 2018–2019 U.S.-China trade tensions. We match data on shipments to U.S. ports with the U.S. credit register to analyze trade and bank credit relationships at the bank-firm level. We show that importers of tariff-hit products from China were more likely to exit relationships with Chinese suppliers and to find new suppliers in other Asian countries. To finance their geographic diversification, tariff-hit firms increased credit demand, drawing on bank credit lines and taking out loans at higher rates. Banks offering specialized trade finance services to Asian markets eased both financial and information frictions. Tariff-hit firms with specialized banks borrowed at lower rates and were 15 pps more likely and 3 months faster to establish new supplier relationships than firms with other banks. We estimate the cost of searching for suppliers at $1.9 million (or 5% of annual sales revenue) for the average U.S. importer. |
| JEL: | F34 F42 G21 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33754 |
| By: | Hongbin Li; Lingsheng Meng; Grant Miller; Hanmo Yang |
| Abstract: | China’s total fertility rate declined very little following implementation of the One Child Policy (OCP) in 1979/1980, but then fell sharply, by more than one-third, during the early 1990s. In this paper, we propose that strengthening bureaucratic incentives under the “One Vote Veto” (OVV) policy, which strictly prohibited career promotion for adherence failure, was necessary for more “effective” implementation of the OCP—and for its delayed impact on fertility. We use provincial variation in OVV implementation to estimate event study regression inputs needed to build actual and counterfactual sequential multi-decrement fertility life tables, finding that the policy explains 46% of China’s total fertility rate decline during the 1990s, driving it below replacement level. Use of intrauterine devices (IUDs, the most prevalent form of modern contraception in China) that was “recommended” by party officials increased by 133% under the policy, a relative increase more than four times as large as the increase in “voluntary” use. Overall, our paper suggests that population policy made a larger contribution to low fertility in China than suggested by past research. More generally, our paper highlights the central role of aligning bureaucratic incentives with public policy objectives, even in a centrally-planned economy like China’s. |
| JEL: | H70 J13 J18 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33741 |
| By: | Tom Coupé (University of Canterbury); Weilun Wu |
| Abstract: | This paper uses meta-analysis to summarize the literature that analyses the impact of generative AI on productivity. While we find substantial heterogeneity across studies, our preferred estimate suggests that on average, across a wide range of tasks, sectors, study methods and productivity measures, the use of GenAI tools increases productivity by 17 %. We further find some evidence that experimental studies show a higher association between GenAI use and productivity than quasi-experimental studies, and weak evidence that the size of the impact of GenAI tools is bigger for quantitative than for qualitative measures of productivity. |
| Keywords: | Generative Artificial Intelligence, Productivity, Meta-Analysis |
| JEL: | J24 O3 |
| Date: | 2025–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:cbt:econwp:25/09 |
| By: | Junhan Lyu; Tianle Zhai; Zicheng Peng; Xuhang Huang |
| Abstract: | This paper examines the impact of increasing minimum wages, focusing primarily on their effect on employment. Our research involved analyzing the statistics of panel data, testing fixed effects and stationary, conducting linear regression, and integrating the linear regression model with nonlinear model analysis. The results indicate that fluctuations in the employment rate are almost entirely explained by the selected explanatory variables, and there is a significant negative correlation between minimum wages and the employment rate. This paper contributes to current research by providing more comprehensive analyses, particularly through the use of nonlinear models, resulting in better-fitting models. We employed multiple fitting methods for time series data and their differentials, combining these results with nonlinear analysis. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.19617 |
| By: | Wu , Wanrui (Peking University); Liu , Gordon (Peking University); Pan, Yuhang (Peking University) |
| Abstract: | Climate change poses significant challenges to healthcare systems. This research estimates temperature impacts on hospital workload, using inpatient records from more than 1, 000 emergency departments (EDs) in the People’s Republic of China between 2013 and 2022. We find inpatient admissions in EDs decrease by 12.3% on days with a mean temperature below −6°C, while increasing by 7.7% on days with a mean temperature exceeding 30°C, compared with a temperature reference of 12°C to 15°C. Heterogeneity analysis indicates that specific departments such as internal medicine, surgery, and pediatrics experience more substantial increases in workload during extreme heat. Temperature also reshapes the patient structure: male patients, child patients, and patients with injuries or respiratory diseases take up a larger proportion of total admissions on extremely hot days. Considering adaptation methods, we show that hospitals temporarily allocate more junior physicians to EDs when the temperature is hot. Hospitals in cities where people have higher incomes and better-heated homes are less sensitive to temperature changes. In terms of monetary burden, we estimate corresponding healthcare expenditures, which suggest that the impact of extreme temperatures is larger on the insured portion of expenditures than it is on out-of-pocket payments. This research highlights the relationship between temperature and workload burden faced by the major healthcare facilities, providing suggestions for the healthcare system to increase personnel and adjust resource allocation in response to climate change. |
| Keywords: | hospital workload; climate change; extreme temperature; healthcare expenditure; People’s Republic of China |
| JEL: | I10 I12 I18 Q50 Q51 Q54 |
| Date: | 2025–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:0780 |
| By: | Wang, Yuton; Guo, Jingyuan; Deng, Kent |
| Abstract: | Since Kenneth Pomeranz’s Great Divergence that was published in 2000, the scholarly debate has been focused on when the divergence was likely to begin. But a lack of real data for the Pomeranz framework has been noticeable. For our purpose, real data are imperative. The primary-source data this study uses are from the first large-scale modern survey of the rural economy in China in the 1920s and 30s to establish correlations between inputs, outputs and living standards in China’s rural sector. This study views China’s traditional growth trajectory continuing from the Qing to troubled times of the 1920s and 1930s despite considerable negative externalities from a regime change. The present view is that given that the rural economy managed to hang on during the Republican Period despite many disadvantages Qing China would have performed at least at the 1920s-30s’ level. Our findings indicate that rural population did indeed eat quite well during the politically troubled time, supporting Pomeranz’s pathbreaking comparison of utility functions between China’s Yangzi Delta and Western Europe. Secondly, food consumption proved incentives for improvement in labour productivity. Thirdly, China’s peasants were rational operators to maximise their returns. Fourthly, China’s highyield farming depended on land and labour inputs along a production probability frontier, which explains the root cause of the Great Divergence. Finally, there was a ‘little divergence’ inside China which was dictated by rice production, which justifies the Yangzi Delta as the best scenario. |
| Keywords: | Great Divergence; little divergence; primary-source data; inputs and outputs; living standards |
| JEL: | N35 N55 C51 |
| Date: | 2023–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:120277 |
| By: | Zongwu Cai (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA); Jinyan Li (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA) |
| Abstract: | This paper examines the indirect effects of the ongoing China-US trade war on trade balances, employing a modified mediation analysis that includes lagged mediators to enhance the accuracy of traditional models. By integrating these lagged variables, our approach can capture the temporal dynamics. Through a comprehensive econometric analysis on indirect effects bypassing some mediators, we disentangle the direct and indirect effects of trade policies, highlighting the distinct impacts across major regions involved in trade between the two nations. Our findings suggest that the trade war has produced asymmetric effects on the trade balances of China and the US, with notable regional variation. For China, positive indirect effects are observed across all mediators, where rerouted supply chains helped maintain export flows under tariff pressures. In contrast, the US benefits more directly from the trade war, with strong direct effects and minor indirect effects across multiple regions. The inclusion of lagged mediators reveals the gradual adjustment of trade patterns over time, offering a more comprehensive perspective on how the trade war has reshaped global trade dynamics. |
| Keywords: | International trade, Trade friction, Mediation analysis, Indirect effects, Lagged mediators. |
| JEL: | C10 F51 F13 C54 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:kan:wpaper:202512 |