Li, Yao, “International Trade and
Industrial Agglomeration,” Job Market Paper presented at The 46th Western
Regional Science Association Annual Meeting, Newport Beach, California, USA,
2007
This paper studies
how the existence of economies of scale and trade costs affect the industrial
distribution，the trade pattern and the wage
difference between two countries. I set up a two-country general equilibrium
model based on Krugman (1991)’s well-known New Economic Geography model, the
Core-Periphery (CP) model. My version of the CP model assumes two production
factors (labor and capital) instead of just one factor (labor) as in Krugman’s
model. Numerical simulations using my model show that agglomeration of
labor-intensive industries occurs in the labor-abundant country if trade costs
are low enough, regardless of whether or not there are trade costs for
agriculture and capital mobility across countries. But an economy with more
labor and therefore more consumers does not necessarily have a higher wage and
a disproportionately larger share of manufacturing production, as predicted by
the CP model. It actually has lower wages in most of my simulations due to the
decreasing value marginal product of labor, which is not reflected in Krugman’s
CP model. The agglomeration of industries is impeded when the country with the
smaller market has the comparative advantage in manufacturing. When the gains
from trade associated with comparative advantage are not large enough for the
labor-abundant country to compensate for the trade costs, to get more varieties
will become the main purpose of trade. This also can disperse the production of
labor-intensive industries. The paper also shows that both trade and capital
liberalization can increase wages in labor-abundant countries, and thereby
decrease the wage difference between the two countries.
Li, Yao, “Empirical Study on China’s Economic Agglomeration,”
Work in Progress, 2007
This paper studies
the interaction between China’s
regional labor endowment, market size and wage level. It seeks to explain the
regional wage disparity in China
from a New Economic Geography perspective. The nonlinear regression based on
pooled data of 237 cities from 1990 to 2000 shows that the regions with larger
markets and labor endowments tend to have higher wage levels. This is
consistent with most New Economic Geography studies’ predictions on industrial
agglomeration. The estimated results also show that China’s product elasticity of
substitution parameter is around 4 in the early period of its reform which is
relatively low compared to previous estimates for other countries. In the
period of 1996-2000, the estimated product elasticity of substitution of China decreased
to slightly above 1. This could be a warning that the agglomeration has made
the sub-regions of China
lose their diversification in intermediate inputs.
Li,
Yao and Edmonds, Christopher, “Export Incentive and Trade Intensity of China,”
Working Paper, 2007
In this paper, we
use an intensity approach incorporated with a gravity model to examine whether China trades
more intensively with specific countries or regions. Our gravity model adjusted
trade intensity index indicates that: 1. The East and Southeast Asia market is
not the most important market to China. 2. China has increasing interests in Africa’s Market during the period of 1985 and 2002. 3. China has not seriously over-imported from
Middle East oil suppliers as have industrialized countries like Japan. By
“over-import” we mean import more than the average level of our sample
countries. We find that the gravity model adjusted trade intensity index
outperforms a traditional gravity model in capturing China’s trade interests,
although, the factors that induce China’s trade interests still can not be
clearly explained.
Edmonds,
Christopher, Sumner La Croix and Yao Li, “China's Rise as an International Trading
Power,” East-West Center Working Papers, Economics Series, No. 88, Feb 2006
This research
reviews the policies that have shaped China’s
manufactured export explosion, and examines long trend statistics on the
evolution of China’s
trading partners and the goods it trades in the post-reform period. Common
characteristics in China’s
trade experience with those of earlier successful export-based economies of East Asia are detailed. The authors find that China’s pattern
of trade and trading partners are similar to those of more market-based Asian
economies, but that the Chinese economy’s orientation toward foreign trade is
much greater than expected for an economy of its size and level of development.
The authors argue that China
still has a long way to go in terms of its export boom, especially if compared
to the experiences of South Korea,
Japan, and Taiwan. This
suggests that China
is on track to become one of the world’s most formidable trading powers and its
export policies and export performance will exert increasing influence on how
the global trade regime evolves in the future.
Dissertation: Essays on Spatial
Distribution of China’s Economic Activities