Discussion paper

DP16119 High-Skilled Services and Development in China

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.


Fang, L and B Herrendorf (2021), ‘DP16119 High-Skilled Services and Development in China‘, CEPR Discussion Paper No. 16119. CEPR Press, Paris & London. https://cepr.org/publications/dp16119