Structural Transformation and its Implications for the Chinese Economy

45 Pages Posted: 30 Sep 2020

See all articles by Gaofeng Han

Gaofeng Han

Hong Kong Monetary Authority; University of California, Santa Cruz - Department of Economics

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Date Written: August 2020

Abstract

This study examines China's structural transformation under the assumption that its employment structure converges to that in major developed economies in one and a half decades. The required annual output differentials between tradable and nontradable sectors, productivity increment in the nontradable sector, and government expenditure increment are estimated with the goal of employment stability conditional on population ageing. It appears that labour transfer from the tradable sector to the nontradable sector would be accompanied by relatively large aggregate output changes due to population ageing and efficiency changes in the tradable sector. Consumer price and real exchange rates are less affected during structural transformation. Although fiscal deficit would increase, government expenditure as a tool to stabilize employment is welfare improving as long as job switching is not cost prohibitive.

Suggested Citation

Han, Gaofeng, Structural Transformation and its Implications for the Chinese Economy (August 2020). Pacific Economic Review, Vol. 25, Issue 3, pp. 339-383, 2020, Available at SSRN: https://ssrn.com/abstract=3701722 or http://dx.doi.org/10.1111/1468-0106.12292

Gaofeng Han (Contact Author)

Hong Kong Monetary Authority ( email )

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

University of California, Santa Cruz - Department of Economics ( email )

Santa Cruz, CA 95064
United States

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