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《China Industrial Economics》 2018-09
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Intermediate Goods Trade and Sino-American Trade Frictions Effects on Welfare: Based on the Theoretical and Quantitative Perspective

FAN Hai-chao;ZHANG Li-na;Institute of World Economy, School of Economics, Fudan University;Shanghai Institute of International Finance and Economics;College of Business, Shanghai University of Finance and Economics;  
Using the quantitative analysis method, this paper evaluates the impact of Sino-US trade frictions from the perspective of intermediate trade liberalization. Firstly, we document two stylized facts on the intermediate trade between China and United States. Then, based on Melitz and Ottaviano(2008), we build a heterogeneous firm model and theoretically discuss the different impact on welfare of the tariff reduction of both the intermediate and the final goods. We found that the import tariff reduction of the final products will decrease the host's welfare, while the decrease of that of the intermediate inputs will increase the country's welfare instead.Quantitative analysis results further support the propositions of the former theoretical model—such Sino-America trade frictions will worsen the two countries' overall welfare level, and relatively speaking, China's welfare will deteriorate more. This paper provides further evidence of the positive impact of trade liberalization on the welfare level, and we hope that all parties should take bilateral(multilateral) negotiations and consultations as the means to settle disputes, to build a fairly competitive trade pattern.
【Fund】: 国家自然科学基金青年项目“中间产品贸易自由化与进出口产品价格:集约边际和广延边际影响的理论与实证分析”(批准号71603155)
【CateGory Index】: F752.7;F757.12
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