Feeding China's Rise: The Growth Effects of Trading with China 1993:2011 

I construct a dynamic, multi-sector model of trade and growth and use it to quantify how China’s rapid expansion of trade over the last two decades has contributed to world economic growth. The model notably features a rich interplay between changes in sectoral-level trade and the usage of each sector in consumption, investment, and intermediate goods production. I find the changing sectoral structure of China’s trade during the period 1993-2011 has generally incentivized increased capital accumulation in other countries, both through its increased exports of capital goods (which serve as key inputs for investment) and through its increased appetite for non-manufacturing imports (which tend to be capital-intensive). These “dynamic sectoral linkages” greatly enrich the welfare implications of an equivalent “static” framework without capital formation: long-run real income gains from the dynamic model exceed static gains by a factor of more than ten, largely due to favorable changes in industry-level prices. They also reverse short-run losses for some countries that suffer initially from China’s change in comparative advantage. Nonetheless, because capital takes time in order to fully adjust to changes in sectoral prices, the majority of China’s spillover effects on world growth may still have yet to be felt.