Trade liberalization and China’s urban-rural income gap: an empirical research based on China’s prefecture-level panel dataFeb. 11,2020
In this paper, we attempted to study the impact of trade liberalization on China’s urban-rural income gap. Meanwhile, we came up with an explicit mechanism that trade liberalization affected rural labors’ non-agricultural employment. This is the practice of H-O theorem, and accords to the fact that the huge migration of rural labor to cities is happening in today’s China. Based on China’s prefecture-level panel data from 2000 to 2013, the OLS and IV approaches both find that trade liberalization significantly narrows China’s urban-rural income gap. It is because that trade liberalization promotes the non-agricultural employment of rural labor. In addition, we find the positive impacts of exports, final and intermediate imports on narrowing China’s urban-rural income gap. Hence, we think that we should stick to the policy of reform and opening-up and take a more active part in the global production network. Meanwhile, when encouraging export, we should also pay attention to import. We should ensure trade balance, and make it develop sustainably.
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