DP16119 High-Skilled Services and Development in China

Author(s): Lei Fang, Berthold Herrendorf
Publication Date: May 2021
Keyword(s): China, high-skill-intensive services, State-owned enterprises, structural change
JEL(s): O41, O47, O51
Programme Areas: Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16119

We document that the employment share of high-skill-intensive services is much lower in China than in countries with similar GDP per capita. We build a model of structural change with goods and low- and high-skill-intensive services to account for this observation. We find that large distortions limit the size of high-skill-intensive services in China. If they were removed, both high-skill-intensive services and GDP per capita would increase considerably. We document a strong presence of state-owned enterprises in high-skill-intensive services and suggest that this leads to important distortions.