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Growing together or growing apart ? a village level study of the impact of the Doha Round on rural China

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  • Kuiper, Marijke
  • van Tongeren, Frank

Abstract

Most studies of the opening of the Chinese economy focus at the national level. The few existing disaggregated analyses are limited to analyzing changes in agricultural production. The authors use an innovative village equilibrium model that accounts for nonseparability of household production and consumption decisions. This allows them to analyze the impact of trade liberalization on household production, consumption, and off-farm employment, as well as the interactions among these three aspects of household decisions. They use the village model to analyze the impact of price changes and labor demand, the two major pathways through which international trade affects households. Analyzing the impact of trade liberalization for one village in the Jiangxi province of China, the authors find changes in relative prices and outside village employment to have opposite impacts on household decisions. At the household level the impact of price changes dominates the employment impacts. Comparing full trade liberalization and the more limited Doha scenario, reactions are more modest in the latter case for most households, but the response is nonlinear to increasing depth of trade reforms. This is explained by household-specific transaction (shadow) prices in combination with endogenous choices to participate in the output markets. Rising income inequalities are a growing concern in China. Whether trade liberalization allows incomes to grow together or to grow apart depends on whether one accounts for the reduction in consumption demand when household members migrate. Assessing the net effect on the within-village income distribution, the authors find that poorer households that own draught power gain most from trade liberalization. The households that have to rely on the use of own labor for farm activities and are not endowed with traction power, nor with a link to employment opportunities in the prospering coastal regions, have fewer opportunities for adjustment.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3696.

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Date of creation: 01 Sep 2005
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Handle: RePEc:wbk:wbrwps:3696

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Keywords: Environmental Economics&Policies; Economic Theory&Research; Banks&Banking Reform; Housing&Human Habitats; Access to Markets;

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References

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  1. J. Taylor & Irma Adelman, 2003. "Agricultural Household Models: Genesis, Evolution, and Extensions," Review of Economics of the Household, Springer, Springer, vol. 1(1), pages 33-58, January.
  2. Zeller, Manfred & Sharma, Manohar & Ahmed, Akhter U. & Rashid, Shahidur, 2001. "Group-based financial institutions for the rural poor in Bangladesh: an institutional- and household-level analysis," Research reports, International Food Policy Research Institute (IFPRI) 120, International Food Policy Research Institute (IFPRI).
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  5. Fangbin Qiao & Bryan Lohmar & Jikun Huang & Scott Rozelle & Linxiu Zhang, 2003. "Producer Benefits from Input Market and Trade Liberalization: The Case of Fertilizer in China," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 85(5), pages 1223-1227.
  6. Bowlus, Audra J. & Sicular, Terry, 2003. "Moving toward markets? Labor allocation in rural China," Journal of Development Economics, Elsevier, Elsevier, vol. 71(2), pages 561-583, August.
  7. Demurger, Sylvie & Sachs, Jeffrey D. & Woo, Wing Thye & BAO, Shuming & Chang, Gene, 2002. "The relative contributions of location and preferential policies in China's regional development: being in the right place and having the right incentives," China Economic Review, Elsevier, Elsevier, vol. 13(4), pages 444-465, December.
  8. Jikun Huang & Ninghui Li & Scott Rozelle, 2003. "Trade Reform, Household Effects, and Poverty in Rural China," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 85(5), pages 1292-1298.
  9. Kuiper, Marijke H., 2005. "Village Modeling: A Chinese Recipe For Blending General Equilibrium And Household Modeling," Report Series, Agricultural Economics Research Institute 29133, Agricultural Economics Research Institute.
  10. Diao, Xinshen & Fan, Shenggen & Zhang, Xiaobo, 2003. "China's WTO accession: impacts on regional agricultural income-- a multi-region, general equilibrium analysis," Journal of Comparative Economics, Elsevier, vol. 31(2), pages 332-351, June.
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  12. Loren Brandt & Dwayne Benjamin, 1999. "Markets and Inequality in Rural China: Parallels with the Past," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 292-295, May.
  13. Denise Hare, 1999. "'Push' versus 'pull' factors in migration outflows and returns: Determinants of migration status and spell duration among China's rural population," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(3), pages 45-72.
  14. Sarah Cook, 1999. "Surplus labour and productivity in Chinese agriculture: Evidence from household survey data," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(3), pages 16-44.
  15. Gilbert, John & Wahl, Thomas, 2003. "Labor market distortions and China's WTO accession package:: an applied general equilibrium assessment," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 774-794, December.
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Citations

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Cited by:
  1. Hertel, Thomas W. & Winters, L. Alan, 2005. "Poverty impacts of a WTO agreement : synthesis and overview," Policy Research Working Paper Series 3757, The World Bank.
  2. Thomas Hertel & Jeffrey Reimer, 2005. "Predicting the poverty impacts of trade reform," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(4), pages 377-405.
  3. Kwiecinski, Andrzej & van Tongeren, Frank W., 2007. "Quantitative Evaluation of Agricultural Policy Reforms in China: 1993-2005," China's Agricultural Trade: Issues and Prospects Symposium, July 2007, Beijing, China, International Agricultural Trade Research Consortium 55028, International Agricultural Trade Research Consortium.
  4. John Gilbert, 2008. "Agricultural Trade Reform and Poverty in the Asia-Pacific: A Survey and Some New Results," Working Papers, Utah State University, Department of Economics 2008-01, Utah State University, Department of Economics, revised 19 Dec 2008.
  5. John Gilbert, 2008. "Agricultural trade reform and poverty in the Asia-Pacific region: a survey and some new results," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 15(1), pages 1-34, June.
  6. Tan, Shuhao & Heerink, Nico & Kruseman, Gideon & Qu, Futian, 2008. "Do fragmented landholdings have higher production costs? Evidence from rice farmers in Northeastern Jiangxi province, P.R. China," China Economic Review, Elsevier, Elsevier, vol. 19(3), pages 347-358, September.

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