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<p>This paper examines the economic and technological implications of production relocation from the United States to China, focusing on its effects on competitiveness, wage dynamics, and growth. Using a dynamic general equilibrium model, the study innovatively incorporates endogenous R&amp;D to analyze how relocation interacts with technological-knowledge progress and skill-biased technological change (SBTC). The model highlights four key mechanisms: labor effects, efficiency gains, market-size shifts, and price adjustments. Empirical validation, using Social Economic Accounts (SEA) and World Economic Accounts (WEA) data, confirms significant trends: inter-country wage inequality declines due to rising wages in China, while intra-country inequality grows in the US, driven by an increasing skill premium. Additionally, the diffusion of technological knowledge enhances China’s global competitiveness while sustaining US leadership in innovation. The findings underscore critical policy challenges for balancing globalization’s benefits and inequalities, emphasizing the need for targeted R&amp;D investments, education reforms, and enhanced international collaboration.</p>

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Economic Transformations Through Production Relocation: Insights from the US-China Dynamic

  • 期刊论文

  • 发表日期：

    2025年10月22日

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  • Oscar Afonso,
  • Manuela Magalhães

摘要

This paper examines the economic and technological implications of production relocation from the United States to China, focusing on its effects on competitiveness, wage dynamics, and growth. Using a dynamic general equilibrium model, the study innovatively incorporates endogenous R&D to analyze how relocation interacts with technological-knowledge progress and skill-biased technological change (SBTC). The model highlights four key mechanisms: labor effects, efficiency gains, market-size shifts, and price adjustments. Empirical validation, using Social Economic Accounts (SEA) and World Economic Accounts (WEA) data, confirms significant trends: inter-country wage inequality declines due to rising wages in China, while intra-country inequality grows in the US, driven by an increasing skill premium. Additionally, the diffusion of technological knowledge enhances China’s global competitiveness while sustaining US leadership in innovation. The findings underscore critical policy challenges for balancing globalization’s benefits and inequalities, emphasizing the need for targeted R&D investments, education reforms, and enhanced international collaboration.