The Impact Of China’s Trade Liberalization On The Income Disparity

Income distribution is one of the key issues of academic research, which not only relates to the livelihood of people, but also closely relates to the sustainable development of economy and society. However, the issue of income gap cannot be avoided for most developing countries. China also has a widening income gap income in the transition period, accompanying the rapid economic growth. China’s income gap has affected the sustainable development and the establishment of China’s moderately well-off society.In recent years, Scholars from many countries are watching China’s income gap, and have achieved fruitful results. But few scholars have concern that China’s income gap is accompanied by the China’s trade liberalization process. Since the reform and opening up, especially after Deng Xiaoping’s southern tour in1992, China increased trade liberalization process, which effectively promoted the economic growth. And Chinese has become a big trade country in the world. According to the existing trade theory, the impact of trade liberalization on income distribution is uncertain. Therefore, this paper mainly studies of trade liberalization affect the income gap in China.The main contents of this paper include literature review, China’s trade liberalization process, the income gap and the impact of trade liberalization on the income gap. This Paper is divided into seven chapters, the specific content and conclusions of each chapter as follows:The first chapter is the introduction, which introduces the background, research methods, logical thinking, and research significance and so on.The second chapter sorts the trade theory. As the representative of the classical trade theory, the Ricardian model (David Richardo Model) began to attend the relationship between income distribution and international trade. And neoclassical trade theory is more complete and systematic study of the relationship between income distribution and international trade, HO and SS theorem is the representation of this theory. Since then, the new trade theory puts technological progress into international trade, which not only explains the emerging industry trade patterns, but also begins to focus on the impact of trade on the income.The third chapter analyzes the trend of trade liberalization and income gap in China, and analyzes the transmission mechanism of the trade effects on the income gap. Since the1990s, China’s income gap is widening and the Gini coefficient overall trend on the rise. The major reasons of China’s income gap including monopolies, human capital differences, institutional factors, market distortions and urban-rural dual structure. The path of the impact of trade liberalization on income distribution includes price changes, industrial restructuring, wage-employment channels and government action.The fourth chapter examines the impact of trade liberalization on regional income gap. Based on the CHNS, This part measures the urban and rural areas income gap. The results show that trade liberalization has a strong heterogeneity effect.(1) Trade openness expanded the income gap in China urban and rural areas.(2) Relative to regions with low labor factor mobility, trade openness narrowed the income gap in regions with high labor factor mobility.Based on the Chinese Household Income Project Survey, the fifth chapter explores the impact of trade liberalization on the wage gap in China at different quantiles using the methods of Oaxaca-Blinder decomposition, quantile regression and quantile decomposition. The results show the early trade liberalization narrows the unskilled worker’s wage gap between trade sector and non-trade sector, but because of the level of human capital, trade sector wage level is still lower than the non-tradable sector. With the development of trade liberalization, the trade sector demands more skilled workers and increases the skilled workers’wage level of trade sector, but due to the level of human capital weaknesses as well as a large number of middle-income wages lower than the non-tradable sector, the total wage level of trade sector is still lower than the non-tradable sector.By establishing a general equilibrium model, Chapter six provides trade openness will cause technological catch-up in developing countries. Thereby developing countries will increase the demand of skilled workers and expand the relative wage of skilled workers and unskilled workers. Based on the CGSS database, using two stage least square and two stage GMM method, This paper shows that trade openness is conducive to improve the wage of unskilled workers and skilled workers, but also widens wage gap between skill workers and unskilled workers, which is contrary to the S-S theorem.Chapter seven is the summary, which summarizes the conclusions of the paper, describes the policy implications and proposed the future research directions.