Structural Change and Global Trade

48 Pages Posted: 6 Jun 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: 2018-04-10

Abstract

Services, which are less traded than goods, rose from 50 percent of world expenditure in 1970 to 80 percent in 2015. Such structural change restrained "openness"—the ratio of world trade to world GDP—over this period. We quantify this with a general equilibrium trade model featuring non-homothetic preferences and input-output linkages. Openness would have been 70 percent in 2015, 23 percentage points higher than the data, if expenditure patterns were unchanged from 1970. Structural change is critical for estimating the dynamics of trade barriers and welfare gains from trade. 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 (2018-04-10). FRB International Finance Discussion Paper No. 1225, Available at SSRN: https://ssrn.com/abstract=3187706 or http://dx.doi.org/10.17016/IFDP.2018.1225

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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