Structural Change and Global Trade

55 Pages Posted: 17 Nov 2020

See all articles by Logan Lewis

Logan Lewis

Board of Governors of the Federal Reserve System

Ryan Monarch

Board of Governors of the Federal Reserve System

Michael Sposi

Southern Methodist University (SMU)

Jing Zhang

University of Michigan at Ann Arbor

Date Written: February 1, 2020

Abstract

Services, which are less traded than goods, rose from 58 percent of world expenditure in 1970 to 79 percent in 2015. Using a Ricardian trade model incorporating endogenous structural change, we quantify how this substantial shift in consumption has affected trade. Without structural change, we find that the world trade to GDP ratio would be 15 percentage points higher by 2015, about half the boost delivered from declining trade costs. In addition, this structural change has lowered the global welfare gains from trade integration by almost 40 percent over the past four decades. Absent further reductions in trade costs, ongoing structural change implies that world trade as a share of GDP would eventually decline. Going forward, higher income countries gain relatively more from reducing services trade costs than from reducing goods trade costs.

Keywords: Globalization, Structural Change, International Trade

JEL Classification: F41, L16, O41

Suggested Citation

Lewis, Logan and Monarch, Ryan and Sposi, Michael and Zhang, Jing, Structural Change and Global Trade (February 1, 2020). FRB of Chicago Working Paper No. 2020-25, Available at SSRN: https://ssrn.com/abstract=3729630 or http://dx.doi.org/10.2139/ssrn.3729630

Logan Lewis

Board of Governors of the Federal Reserve System ( email )

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

Ryan Monarch

Board of Governors of the Federal Reserve System ( 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 (Contact Author)

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
103
Abstract Views
453
Rank
469,563
PlumX Metrics