The Welfare Effect of Foreign Productivity and Quality Growth: A Quantitative Analysis

Abstract

Is the growth of emerging economies a benefit or a threat for the rest of the world? Ikema (1969, Oxford Economic Papers) theoretically demonstrated that a country’s productivity growth normally benefits other countries. Ohyama (1998, Mita Journal of Economics; 2010, Keio Economic Studies) demonstrated that a country’s quality growth may hurt other countries if consumer preference exbihits home bias for quality. Using a multi-country, multi-industry Ricardian model of global value chains allowing quality home bias, this paper estimates the productivity growth and the quality growth of emerging economies during 1995-2007 and quantifies their welfare effects on Japan and other countries.