News Release | Keynote Lecture Brief of Jiandong Ju

Keynote Lecture Brief

Speaker:

Jiandong Ju (Dean of School of International Business, Shanghai University of Finance and Economics)

Topic:

Dynamic Structure Analysis: International Trade and Macro Economics

Professor Jiandong Ju’s lecture focuses on dynamic structure analysis, which provides a framework to study structure economics. The start point is that along with dynamic growth, we can always see structure change. That is to say, we need to analyze two dimensions of economic change: time dimension along which we discuss aggregate change, and micro structural change, particularly endowment structure. The lecture introduces three basic papers of dynamic structural analysis and proposes research questions of the next steps. 

Professor Jiandong Ju firstly introduces the paper entitled “Endowment structures, industrial dynamics, and economic growth” by Jiandong Ju, Justin Lin, and Yong Wang. This paper provides a basic framework for dynamic analysis, which is a multi-sector, homogeneous firms, closed economy dynamic model. The paper finds that there exists tremendous cross-industry heterogeneity in capital-labor ratio. Each industry exhibits an inverse-V shape life cycle. The more capital-intensive an industry is, the later it reaches its peak. The further away an industry’s capital intensity deviates from the economy’s endowment structure, the smaller the industry is. The paper proposes a theory of endowment-driven structural change to explain the four above-mentioned features.

The second paper is “Trade reforms, structural changes and current account imbalance” by Jiandong Ju, Kang Shi and Shangjin Wei. Compared with the first paper, which discusses closed economy, this paper discusses open economy. A modified Heckscher-Ohlin model that incorporates structural change and capital flow is established. The key question is whether China’s entry into WTO leads to China’s trade surplus. Conventional literature believes that trade imbalance is due to the under-evaluation of RMB. In contrast, this paper finds that structural change is the driving force of trade imbalance, i.e. micro structural change is the driving force of dynamic current account. The paper shows that trade liberalizations in a developing country would generally lead to capital out flow. 

The third paper is “Structural adjustments and international trade: theory and evidence from China” by Hanwei Huang, Jiandong Ju and Vivian Z Yue. This paper embeds firm heterogeneity into a trade model (in a static model) and matches the model to real data. The key questions of this paper are—what is the driving force behind China’s structural adjustment? What is the role of technology change, capital deepening and trade liberalization? The paper constructs a theoretical model that embeds heterogeneous firms into a continuous Ricardian and Heckscher-Ohlin framework, and then uses Chinese manufacturing firms to estimate the model in a structural way. 

These three papers provide the basic framework of dynamic structural analysis. The first paper establishes a homogeneous-firms, closed economy dynamic model as the baseline model. The second paper extends the baseline model to homogeneous firms, open economy dynamic model. The third paper extends the baseline model to heterogeneous firms, open economy static model. 

Regarding the directions for future research, the first is to make the third paper dynamic. The second is to bring regional economics into dynamic structural analysis so to capture labor and capital flows. With these models, we will have a unified quantitative model to discuss structural change, macro economy and factor flow at county level. The third is to model various market failures in the dynamic structural model and study the roles of both central and local governments. 

Please stay tuned for the series of stories on the 4th New Structural Economics Summer School in forthcoming days!

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