Structural Change and Global Trade

48 Pages Posted: 7 Feb 2018 Last revised: 29 Apr 2020

See all articles by Logan T. Lewis

Logan T. Lewis

Federal Reserve Board, Trade and Quantitative Studies

Ryan Monarch

Federal Reserve Board

Michael Sposi

Southern Methodist University (SMU)

Jing Zhang

Federal Reserve Bank of Chicago

Date Written: 2018-01-01

Abstract

Services, which are less traded than goods, rose from 58 percent of world expenditure in 1970 to 79 percent in 2015. In a trade model featuring nonhomothetic preferences and input-output linkages, we find that such structural change has restrained the growth in world trade to GDP by 16 percentage points over this period. This magnitude is similar to how much declining trade costs have boosted openness. Moreover, structural change dampens the measured gains from trade by incorporating endogenous responses of expenditure shares to the trade regime. Ongoing structural change implies declining openness, even absent rising protectionism.

Keywords: Globalization, structural change, international trade

JEL Classification: F41, L16, O41

Suggested Citation

Lewis, Logan T. and Monarch, Ryan and Sposi, Michael and Zhang, Jing, Structural Change and Global Trade (2018-01-01). Globalization and Monetary Policy Institute Working Paper No. 333, Available at SSRN: https://ssrn.com/abstract=3119598 or http://dx.doi.org/10.24149/gwp333r2

Logan T. Lewis (Contact Author)

Federal Reserve Board, Trade and Quantitative Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

Ryan Monarch

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Michael Sposi

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

Jing Zhang

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

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