A Study On The Impact Of International Trade Development And FDI On China’s Urban-Rural Income Gap

In the context of economic globalization,the exchanges between countries are becoming more and more frequent,which is mainly reflected in the economic aspects of trade liberalization between countries.Among them,since the reform and openingup in 1978,the development of trade has been progressive in the exploration and gradually become the important component of our national economy.At the same time,in the process of economic and trade development,social equity(mainly manifested as the income gap between urban and rural residents)has been paid much attention.If the income gap is always at a larger level,it will affect the long-term smooth operation of a national economy and social stability at the macro level.Then,analyzing its effect on our urban and rural income gap from the perspective of trade will play an important role in promoting social fairness.Based on the relevant literature research,combined with the actual situation of China’s trade development and income gap,and according to the relevant theoretical basis,using the latest panel data of 31 provinces and cities from 2006 to 2020 to establish a fixed effect model for empirical analysis.First,a linear model is set to analyze the impact of import and export trade,export trade,import trade and FDI on income gap.Secondly,the robustness is verified by adding new control variables,instrumental variables and the square terms of explanatory variables(considering whether there is a nonlinear relationship).Thirdly,the 31 provinces and cities were divided into four regions(east,middle,west and northeast)(as well as coastal and noncoastal regions)for heterogeneity analysis.Finally,variables are selected for adjustment effect analysis.The analysis results show that in the whole country,the continuous development of import and export trade(including the separate effect of export trade and import trade)and FDI can effectively narrow the urban-rural income gap and pass the robust test.Moreover,when the square term of explanatory variable was added for robustness check,it was found that this reduction effect was in a marginal state(the influence result showed that it was on the left side of the "U" shaped structure).Secondly,the heterogeneity analysis by different regional groups shows that the development of import and export trade,export trade(on the left of the "U" shaped structure),import trade and FDI in the eastern region can promote the narrowing of urban-rural income gap.In the middle region,only the import trade has a U-shaped structure effect on the income gap,which decreases first and then expands.For the western and northeastern regions,the development of import and export trade and import trade can narrow the income gap.In addition,export trade and FDI in western China have a significant U-shaped structural influence on income gap.but the narrowing effect of export trade is more obvious.In addition,through another regional grouping analysis,it is found that the development of import and export trade,export trade and import trade has a narrowing effect on the income gap of coastal and noncoastal areas(they are basically on the left side of the "U" shaped structure),while FDI only has a significant negative impact on the income gap of coastal areas.Finally,through the adjustment effect analysis,it is found that improving education level,increasing fiscal expenditure and optimizing employment structure can promote import and export trade and reduce the income gap to some extent,but the upgrading of industrial structure has a certain inhibitory effect.In addition,they will slow down the effect of FDI on the narrowing of income gap.According to the empirical analysis results of the paper,several policy suggestions are briefly put forward,including:on the one hand,constantly optimize the trade structure,that is,balance the quantity of trade exports and trade imports,product types and the adjustment and upgrading of trade structure;On the other hand,we should continue to promote the transfer of trade development from the eastern and coastal areas to the central and western regions and inland regions and strengthen the opening-up of the central and western regions.In addition,we can increase and balance the investment in urban and rural education,raise the level of urban urbanization,and promote the upgrading of industrial structure and financial development level in rural areas to promote the social equity between different regions and within regions as a whole.