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Can Trade Liberalisation Promote Common Prosperity?— Empirical Evidence from Chinese Cities

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  • Wang, Tianchen
  • Lyu, Kangyin
  • Li, Qingyang

Abstract

Within the framework of China’s model of modernisation, common prosperity has become a central policy goal, with openness—especially through trade liberalisation—serving as a key mechanism. This study investigates whether trade liberalisation promotes common prosperity. To this end, it analyses panel data from 284 Chinese cities between 2000 and 2020, combined with micro-level data from the China Family Panel Studies (CFPS). The results demonstrate that trade liberalisation significantly increases household income, reduces income inequality, and enhances intergenerational income mobility. Mechanism analysis indicates that these effects are a consequence of job creation, labour mobility, and human capital accumulation. Heterogeneity analysis further reveals that border cities, high-technology cities, and larger urban areas benefit more significantly, with export liberalisation assuming a more prominent role than import liberalisation due to their distinct transmission channels. Overall, the findings suggest that trade liberalisation fosters economic growth and reconciles efficiency with equity, advancing the goal of common prosperity.

Suggested Citation

  • Wang, Tianchen & Lyu, Kangyin & Li, Qingyang, 2026. "Can Trade Liberalisation Promote Common Prosperity?— Empirical Evidence from Chinese Cities," Economic Analysis and Policy, Elsevier, vol. 89(C), pages 1166-1190.
    • Handle: RePEc:eee:ecanpo:v:89:y:2026:i:c:p:1166-1190
    DOI: 10.1016/j.eap.2025.10.022
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