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Browsing by Author "Chu, Tianshu"

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    Economic Effects of Liberalization: The Case of China's Accession to the World Trade Organization
    (Center for Economic Research, Department of Economics, University of Minnesota, 2003-03) Bajona, Claustre; Chu, Tianshu
    Many developing economies have joined or applied to join the WTO as part of their process of transformation to market-oriented economies. Accession to the WTO involves provisions to liberalize capital markets and to significantly reduce domestic industrial subsidies to the, usually large, state-owned sector. Therefore, any welfare gains derived from such policies are to be considered as part of the welfare gains of trade liberalization. In this paper we develop a dynamic applied general equilibrium model to quantitatively assess the welfare benefits of capital market liberalization and domestic industrial policy reform, and we apply it to the case of China's accession to the WTO. We find that most of China's benefits of accessing the WTO are derived from the reduction of the state-owned sector driven by the reform in domestic policy required by the treaty. The highest welfare benefits occur when both domestic policy reform and capital market liberalization are jointly implemented. Welfare is enhanced by early opening of the capital markets.
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    Vertical Specialization with Heterogeneous Entrepreneurs: Can Trade Promote Industrialization of Developing Countries?
    (Center for Economic Research, Department of Economics, University of Minnesota, 2001-01) Chu, Tianshu
    This paper explores the theoretical link between trade liberalization and industrial development in developing economies. A two-country, three-good, and three-factor computable general equilibrium model is developed, which features a capital-intensive intermediate good, and a special factor of production, the entrepreneurial skill. The numerical results suggest that with free trade, the developing economy can import the cheaper capital-intensive intermediate good and largely expand its manufacture sector. Moreover, the developing economy can export its manufactured product to the developed economy. Unlike the conventional static trade models that predict that developing economies will de-industrialize with free trade, this theory helps to understand the rapid industrial expansion in newly industrialized economies while liberalizing their international trade.