Structural Change and Global Trade
48 Pages Posted: 7 Feb 2018 Last revised: 29 Apr 2020
Date Written: 2018-01-01
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
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