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Structural transformation and international trade: Evidence from the China shock

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  • Clément Nedoncelle
  • Julien Wolfersberger

Abstract

How does international trade affect structural transformation in developing countries? We use data on sectoral allocation of labour and value-added in 46 developing economies over the period 1995-2017 and exploit for identification plausibly exogenous variation in manufacturing imports from China. We find that the so-called 'China shock' largely slows down the transformation of low- and middle-income economies out of agriculture. In our main specification industrialization decreases by 0.49 per cent on average for each additional per cent of manufacturing imports from China.

Suggested Citation

  • Clément Nedoncelle & Julien Wolfersberger, 2023. "Structural transformation and international trade: Evidence from the China shock," WIDER Working Paper Series wp-2023-64, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2023-64
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    File URL: https://www.wider.unu.edu/sites/default/files/Publications/Working-paper/PDF/wp2023-64-structural-transformation-international-trade-evidence-China-shock.pdf
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    References listed on IDEAS

    as
    1. Tasso Adamopoulos & Diego Restuccia, 2014. "The Size Distribution of Farms and International Productivity Differences," American Economic Review, American Economic Association, vol. 104(6), pages 1667-1697, June.
    2. David H. Autor & David Dorn & Gordon H. Hanson, 2016. "The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 205-240, October.
    3. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    4. Valentinyi, Akos & Rogerson, Richard & Herrendorf, Berthold, 2022. "New Evidence on Sectoral Labor Productivity: Implications for Industrialization and Development," CEPR Discussion Papers 17085, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    Developing countries; Industrialization; Structural transformation; Trade;
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