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Toward a consumer economy in China: implications of changing wage policies for U.S. cotton exports

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  • Stephen Macdonald
  • Suwen Pan
  • Darren Hudson
  • Francis Tuan

Abstract

The effect of a Chinese minimum wage increase on China's textile market as well as on the world cotton market is evaluated. Based on a Nonlinear Quadratic Almost Ideal Demand System (NQAIDS) model of China's textile demand, the results suggest that the income elasticity for textiles is around 0.6 in China, and that apparel is less price responsive than home textiles and other textile products. Simulation results suggest that a minimum wage increase would raise Chinese domestic textile consumption and lower Chinese textile exports. Most of the decline in textile exports by China is offset by expansion in other countries’ domestic textile production and results in a slight increase in world cotton mill utilization and higher clothing prices.

Suggested Citation

  • Stephen Macdonald & Suwen Pan & Darren Hudson & Francis Tuan, 2014. "Toward a consumer economy in China: implications of changing wage policies for U.S. cotton exports," Agricultural Economics, International Association of Agricultural Economists, vol. 45(4), pages 513-524, July.
    • Handle: RePEc:bla:agecon:v:45:y:2014:i:4:p:513-524
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    1. MacDonald, Stephen, 2014. "China's Cotton Policy: New Directions in 2014," Agricultural Outlook Forum 2014 168619, United States Department of Agriculture, Agricultural Outlook Forum.

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    More about this item

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • R34 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Input Demand Analysis
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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