Impact Of Trade Openness On Farmers' Non-agricultural Income

It has been thirty years since Chinese government adopted the policy of reform and opening up.The dual economic structure in urban and rural areas is getting severe day by day and the urban-rural income gap also keeps widening.From 19th century nineties to early 20th century, urban citizens income is twice as that of rural citizens while the ratio turns to three times from 2002 to 2009.As the urban-rural income gap is getting wide increasingly, issues of agriculture,countryside and farmers becomes the focus of social concern. The key point of issues of agriculture,countryside and farmers is how to increase the farmers' income.The impact of trade openness on farmers'income is the issue which draws the public concens.Most researches under way is focus on the trade impact on agricultural income.However, take a look at the composition of farmers' income,it is not only agricultural income but also non-agricultural income.In fact,the non-agricultural income is becoming an increasingly important part of farmers'income.Therefore the research on the trade openness impact on farmers' non-agricultural income is of utmost practical significance. In the meanwhile, the incomes of different areas vary because of disparate economic development,so the non-agricultural income of peasants differs from area to area. In a word,the research on trade openness effect on farmers' non-agriculutral income is of important policy implication for increasing peasants'income and narrowing the distict gap.Although non-agricultural income has been a new growth point of farmer'income, the increase of peasants' non-agricultural income does not narrow the farmers'income gap among the whole country.This is probably because the peasants'non-agricultural income gap in our country is not noly reflects in different districts, but mostly exist in heterogeneous labor that is skilled labor and unskilled labor.By upgrade of trade structure and technique progress, the trade openness will have different effects on the demands of skilled and unskilled labor.It will further bring income differences among different labor and result in widening the non-agricultural income gap. As non-agricultural income is becoming the key point of peasants'income growth, the trade openness has an effect on peasants'non-agricultural income in labor market.The distric differences exist in peasant's non-agricultural income in China. On the basis of positive analysis of trade openness on peasants'non-agricultural income, the essay makes further analysis on the impact of trade openness on the non-agricultural income increase and district convergence.Non-agricultural labor in countryside differs in ablity,they get different non-agricultural pay in non-agricultural department. This paper analyzes the impact of the trade liberalization of China's industrial sector on heterogeneous labor income so as to reveal trade liberation's role on the peasant's non-agricultural income gap.In this paper, Theil index is adopt to make measurement and decomopsition on the peasants" non-agricultural income difference from 1985 to 2007.The analysis shows that Theil index of peasants'non-agricultural income grow from 1985 to 1996 and unstable after that. Differences in east.middle and west areas have been on rise since 1985 while the differences among east,middle and west areas expand from 1985 to 1992, but declined after trade liberation in 1992. Of the composition of total non-agricultural income difference, the regional difference is always the deciding factor. But the impact of the differences among east,middle and west has declined since 1985,while the differences among the three areas are on rise.The research in this article shows that since the reforming and openning up, the peasants'non-agricultural income is on the rise and trade liberation plays a positive role in the income growth.This paper further analyze how trade liberation influnece the non-agricultural income growth and the convergence.Basing on the related data from 1985 to 2007,by the inspection of two parameters it shows peasants' non-agricultural income all over the country is in the state of convergence since trade openness in 1992. Peasants' non-agricultural income gap narrowed in the whole country. Taking the trade openness into consideration, peasants'non-agricultural income convergence accerlated obviously and trade openness is the most important factor in narrowing the income gap.This paper first analyze in theory the influence mechanism of trade openness on heterogeneous labor income.Compared with the developed countries, it still exist technological gap between China and the developed countries. As China is rich in cheap labor and some rich resources, the developed countries will outsource Low-tech production processes to our country and import intermediate products from China. The low-tech production processes outsourced to China are higher than our production lever, and the great amount of intermediate production export will result in the increase of unskilled labor demands. The intermediate products trade produced by the transfer of division in products and international production chain will enlarge the income gap among heterogeneous labors. On the basis of the theoretical analysis, from the perspective of trade and technological spillovers, this paper analyze whether the influence mechanism of trade openness on unskilled labor relative income is applicable in China. First estimate the total factor productivity of industrial sector by factor analysis of economic growth, which shows the technical progress in industry and then certify that foreign trade has positive spillover effect of technology by empirical analysis. The development of intermediate product trade lead to the upgrade of technical lever, which increase the relative demand of unskilled labor and further expand the income gap.This paper makes empirical analysis on the related data in the 31 sub industry sectors from 1995 to 2007 finally shows that the final product trade has negative effect on the relative income of the skilled labors, while the intermediate product trade has positive effect. As the intermediate products trade effect is much more important than final products trade, our trade openness will widen the income gap between the skilled and unskilled labors. With the development of the intermediate product trade, its ratio growth will widen the gap further. The income distribution of the intermediate product trade should get more attention. Because of the great difference in non-agricultural labor in countryside, the income distribution brought by trade liberation will widen the income gap.According to the above conclusions, trade openness will provide more employment opportunities and beneficial for peasants'income increasing and regional non-agricultural income gap narrowing. However the trade openness has different effect on skilled and unskilled labors, which widened the income gap betweeen skilled and unskilled labors. In order to increase the farmers' income and welfare, there is some policy advice:First, take a positive part in international division, enlarge the trade openness, follow the trend of the economic globalization and deepen the trade liberation. These measures are beneficial for increasing the employment lever, lowering domestic employment pressure, narrowing regional gap and increase the farmers'welfare. Second, increasing the investment in labor capital in countryside. According to the data collected in this paper, the average salary of skilled labor is almost twice of unskilled labors. Although trade openness is good for lifting the total employment in countryside, it will widen the income gape between skilled and unskilled labors, which is conducive to social stability and development. Labor ability improvement is the focus to narrow peasants' income gap. The government should increase the investment in countryside labor capital, regional education, labor skills training to improve their skills.In a word, in order to follow the developing trend of foreign trade, our country should foster more high-quality rural labors which is beneficial for balanced income distribution, the upgrade and development of the industry structure of our country and the beneficial circle of economy.