Impact Of China’s Trade Openness On Urban-rural Household Income Inequality

In the era of economic globalization, each country gradually integrates into the system of international labor division and cooperation in order to promote the economic development. In the trend of trade globalization, China faces a more open international markets and free trade. With the establishment of market economy and the accession to the WTO, China’s trade openness has enjoyed rapid development, trade dependence increases rapidly.At the same time, China’s urban-rural residents’ income inequality also presents a trend of expansion.Since trade openness and the urban-rural residents income inequality are in the similar trend of increasing and are simultaneously presented in the context of reform and opening up, it is easy to let us make some connection between the trade openness and the urban-rural residents income inequality. As a result, both domestic and foreign scholars have made a lot of research for the effect of trade openness on the urban-rural residents income inequality.There is no consistent conclusion about the impact of trade openness on the urban-rural residents income inequality because there exists various difference on the objectives of the analysis, the measurable indicators, the mechanism of explanation, the diameter of data,etc. This paper is divided into four sub-studies to explore the role of trade openness on the urban-rural residents’income inequality from different angles.Sub-study1explains the evolution of trade openness and urban-rural residents’ income inequality from the traditional perspective and regional space, then analyzes the relationship between the two.(1) Whether observing from the traditional perspective or regional space, trade openness and urban-rural residents’income inequality are positively correlated.(2) The grey correlation analysis indicates that no matter we analysis it from the sub-regional perspective or from the import or export level, there exists a higher correlation between trade openness and urban-rural residents’income inequality. The results of correlation analysis verified the intuitive sense, that is there exists a strong correlation between trade openness and urban-rural residents’income inequality.According to the neglected geo spatial factors in previous research, sub-study2uses spatial econometrics to analysis the impact of trade openness on urban-rural residents’income inequality based on provincial data from1978to2011. Findings from empirical test:Trade openness has a positive effect on urban-rural household income inequality, which is consistent with the status quo analysis; However, the positive effect of trade openness on urban-rural household income inequality is reduced when considering spatial spillover effect of urban-rural household income inequality, which might be attributed to the crowding-out effect from the positive effect of spatial spillover effect of urban-rural household income inequality to the positive effects of trade openness. Therefore, now that the spatial effect can weaken the positive effect of trade openness to urban-rural household income inequality, we can rationally take advantage of this phenomenon to achieve the goal of promoting foreign trade growth and narrowing the income gap between urban and rural residents by adjusting the spatial effect.In previous study, the data is too much in medium or macro format, and the micro data of previous studies is only in one-year format, so the research results is not intuitive. Sub-study3re-analyses the impact of trade openness on the urban-rural residents’income inequality, which uses the Mincer extension model and the Oaxaca-Ransom decomposition method based on four-years’micro sample data of1995,2002,2007and2010. In this study, the trade openness is placed in a situation of which the macroeconomic factors(such as economic structure, economic development) and micro individual factors(basic features,working characteristics and regional characteristics) are both included.The research results indicate that the overall performance of trade openness on the urban-rural residents’income inequality is a low and negative contribution,but when the trade openness is splitted into export openness and import openness for further investigation, we find the contribution rate on the urban-rural residents’income inequality become larger. The contribution direction of trade openness on the urban-rural residents’ income inequality is stable, and the contribution rate presents an increasing trend on the whole. It is not difficult to see that we cann’t ignore the impact of trade openness just because of a lower contribution rate of trade openness on the urban-rural residents’ income inequality.According to the previous research of trade openness on the urban-rural residents’income inequality, there exists a phenomenon that the literature focus more on influencing factors of trade openness, while sub-study4transfers a little bit attention to the urban-rural residents’income inequality. As everyone knows,"the trouble lies not in scarcity but in uneven distribution", if the urban-rural residents’ income inequality are unbalanced in provincial level, then it is easy to cause the people seem to hate and increase the unstable factors in the society. Therefore, it is of great significance to the economic and social development on promoting the convergence of urban-rural residents’income inequality in the different area of China. In view of this, based on the provincial data of year1978-2011, sub-study4establishes the convergence regression model to analyze the effect of trade openness on growth rate and convergence of the urban-rural residents’income inequality.The study found that trade openness shows a negative effect on the growth rate of the urban-rural residents’income inequality, and shows a divergence but insignificant effect on rural residents’income inequality among various provinces in China. If trade openness is divided into export openness and import openness, the negative effect of trade openness on the urban-rural residents’income inequality is the synergistic effect of the two:one is the negative effect of export openness on the urban-rural residents’income inequality, the other is the insignificant positive effect of import openness on the urban-rural residents’income inequality; and the insignificant divergence effect of trade openness on the urban-rural residents’income inequality is the synergistic effect of the two:one is the divergence effect of export openness on the urban-rural residents’income inequality, the other is the insignificant convergence effect of import openness on the urban-rural residents’ income inequality.Finally, based on the empirical analysis results, the paper conducted a comprehensive summary about the impact of trade openness on urban-rural household income inequality, made some appropriate policy suggestions, and also described the direction for further research.