The Effect Of Trade Liberalization On Poverty: Evidence From China

With the rapid economical development, Chinese government has made great achievements in alleviating poverty. The number of poor population decreased from 250 million to 23.65 million. At the same time, China is more and more open to trade,the tariff and quota decreased a lot while the volume of trade increased sharply. As a necessary step to join the world economy, trade liberalization has brought about the deep change in China’s economy and society. Without any doubt, trade liberalization affected China’s poverty through various means too. On the whole, economists agree that trade liberalization is helpful to alleviate poverty in the long term. But in the short run, its effect is ambiguous, because policies and market environments are different in various countries.This dissertation will discuss the impact of trade liberalization on poverty from three avenues which are economic growth, price change, employment and wage. Trade liberalization is conducive to economic growth, and economic growth is the key to alleviate poverty. Because of the much higher degree of openness in the coastal regions, the effect of trade liberalization on poverty alleviation is much better than that in inland regions. In addition, economic growth increase the government revenue and expenses on poverty alleviation so as to reduce poverty. From the mechanism of price change, the results indicate during 2000 to 2008, the rising price of imported good has a negative impact on the poor families.But on the other hand, the imported farm products have significant effect on the price and output of domestic farm product, thus have negative influnce on some poor families,especially on the poor farmers who produce cotton and wheat. From the mechanism of employment and wage, in manufacturing sector and some of service industries employment and wage both grow due to trade liberalization, and it provides more job opportunities for the poor. Particularly, the poor who come from the rural area will get rid of poverty if they can find work in cities.This dissertation has six chapters. The preface briefly introduces the problems that will bediscussed, the significance of this paper, and discuss the definition of poverty. Chapter 1 introduces the progress of poverty reduction and trade liberalization in China, and illuminate the relationship between trade and poverty. Chapter 2 presents a brief overview of trade liberalization and poverty from four aspects:the economic growth, the price transmission,employment and wage,taxes and spending. The third chapter analysis the relationship between trade liberalization and poverty from the mechanism of economic growth. This chapter constructs a simultaneous equations model and we find that trade liberalization is helpful to increase the income of poor people. And the counterfactual estimations show that poor people’s income increases much more in coastal area than in inland area,because the extent of trade liberalization in the former area is higher than in the latter area.This chapter also analysis the relationship of trade liberalization,economic growth,government expenditure and poverty alleviation.The fourth chapter analysis the price effect of imported goods on poor family.We first estimate the price effect of imported goods on domestic consumption goods. Then we use Chinese household consumption structure to calculate the price effect of imported goods on poor family expense. On the other side, this chapter analysis the effect of farm product trade on domestic poor farmers’income, combining the price transmission effect and output effect. The fifth chapter analysis the relationship between trade,employment,wage and poverty. We study the effect of trade liberalization on employment and wage in manufacture sector,in services-producing sector, in different ownership company.And then,we using low human capital as the identify condition of the poor people to analysis the impact of trade on their job and wage.The sixth chapter is the conclusion, we get a global estimation about the relationship of trade liberalization and poverty in China, and give some policy advices about it.