ABSTRACT
This chapter applies a general equilibrium framework, the Global Trade Analysis Project (GTAP) model, to assess economy-wide effects of the Lewis turning point (LTP) for China. It explores the GTAP model and explains the simulations conducted for this study, including the model closure and the shocks. The chapter discusses the economy-wide consequences of the LTP for the Chinese economy. It concludes by shedding some lights on the question if China will be able to avoid the so-called 'middle-income trap'. The chapter explores a styled shock of 5" reduction in unskilled labor supply in China. China saw the first waves of labor shortage in 2004, when employers in very dynamic Pearl River Delta and Yangtze River Delta experienced difficulties in recruiting enough migrant worker shortage. Textile and clothing is by far the hardest hit industry, consistent with the expectation that China will lose competitiveness in labor-intensive activities quickly.
