1. Effect of capital rigidity in China when trade is liberalized Alessandro & Joachim

2. Research question What are the effects of relative rigidity of Composition of capital and allocation of wealth when trade is liberalized on: -Composition of wealth in China? -Composition of firm capital stock in China? -Income from equity in China?

3. Model assumptions GTAP-Dyn Model assumptions: 1)Capital stock in a region consists of domestic capital owned by - domestic households - the global trust (foreign liabilities) 2)Wealth of a region is composed of - domestic capital owned by domestic households - shares in the global trust Since 1) and 2) are not independent, only ratio between rigidity parameters for capital and wealth (RIGWQ_F/RIGWQH) matters!

4. Results Higher share of wealth in Chinese firms if wealth can be allocated more flexibly; (liberalization results in higher expected returns) Now: increasing share of Chinese equity in Chinese firms! Marginal change in total wealth Higher income from equity to Chinese households from firms

5. Results (R= RIGWQ_F /RIGWQH / RIGWQ_F = 1)

6. Results (R= RIGWQ_F /RIGWQH / RIGWQ_F = 20) Higher share of households on net investments in Chinese firms Investments coming from the trust lower