This thesis investigates the role of globalization in economic development. This thesis consists of three essays.
The first essay studies the role of resource reallocation and globalization in economic development for China. Recent literature on economic growth emphasizes the misallocation of resource at the micro level could reduce TFP at the macro level. Both structural transformation and globalization in China contribute to correct the misallocation of resources in China. Hence they could account for the remarkable growth experience of China. This paper develops a neoclassical growth model that emphasizes the role of structural transformation and international trade to account for the growth experience of China. I calibrate the model to match the data of China and show that the process of structural transformation in an open economy can generate growth rate of GDP comparable to those observed in China in the period 1991-2004.
The second essay is a theoretical study of international trade and economic growth. I build an endogenous growth model with heterogeneous firms. I find that trade liberalization can help reallocate resources to innovation and therefore promotes economic growth.
The third essay reviews the literature of structural change and its implications for economic development. Developing countries started to develop from reallocating labor in agriculture to industrial production. This essay reviews the two main mechanism to generate structural change in standard models of economic growth. Then I review the literature on the role of structural change in studying various issues in economic development.