China's Export Effects: A Product-Level Analysis of Global Supply Chains, Comparative Advantage, and Crowding-Out
Abstract
China's extraordinary economic growth has had a large impact on the world economy. Between 1995 and 2015, China's share in the world's total exports increased from 3.2% to 13.8%. The effect of China's sudden growth may have affected neighboring, developing economies that possessed a similar makeup to China in terms of labor resources and products produced. This paper attempts to address the effects of China's exports on the magnitude and composition of other countries' exports by analyzing a dataset of bilateral trade flows between countries, covering the period 1988-2016 at a highly disaggregated product level. Including the most recent data will include the exogenous shocks of the US Financial Crisis and the Great Trade Collapse of 2008-2009. Disaggregated products are classified by their sector of industry (e.g., electronics and clothing) and final usage in a global supply chain (e.g., intermediate inputs, final goods, and capital goods). Using a gravity model of trade, we quantitatively investigate both the crowding-out and crowding-in of trade due to China's exports. Standard trade theory of comparative advantage suggests if China is relatively good at exporting certain goods, trading partners will produce less (crowding-out), but those resources can be reallocated to new sectors and stages in global supply chains, increasing exports elsewhere (crowding-in). The results show that China's role exhibits a greater influence in crowding-in and crowding-out final goods relative to its effect on stimulating global supply chains. If China's exports remained constant at its 1988 levels, the rest of the world would have experienced around a 10% decrease in trade.
Document Details
- Document Type
- Technical Report
- Publication Date
- May 20, 2019
- Accession Number
- AD1073957
Entities
People
- Davis P. Katakura
Organizations
- United States Naval Academy