| San-Nong Issue (problems about agriculture, rural areas and peasantry) have not only draw the attention of the whole community, but also been the unavoidable topics for the construction of new socialist countryside. Since the reform and opening up in 1978, thanks to the thriving development of foreign trade, social and economic development in rural areas has made remarkable achievement; farmers’ income has also been greatly improved. However, the vulnerable position of farmers has not been changed, and the income gap between urban and rural has been widening. Just when china prepared for entering into WTO at the turn of the century, a great concern about whether further trade openness will have crush on farmers has been occurred, that is, whether further trade openness will deliver bad influence on production and life of rural residents and impede the benefit improvement of farmers. Therefore scholars have carried out many discussions and surveys in this connection, including ex ante forecasts and ex post verification.Then, what is welfare? According to Pigou, welfare is the extent to which the individual needs have been met. This satisfaction is based on economic factors, which can be achieved by goods and services. Thus the level of welfare depends primarily on two factors:price of goods and the income of individual. Therefore, the study on welfare should be conducted in two aspects respectively, that is income and price.However, by reviewing literature, we found the study on the welfare focus either on consumer and producer surplus, or on the residents’ income and consumption. Furthermore, most studies assumed domestic residents as either producers or consumers. In fact, almost 70% of the residents are both producer and consumer. In rural China specifically, as independent accounting units, almost all the households are both production units and consumption units. Meanwhile, differences exist in income and consumption structure among rural households. Thus, in the process of trade liberalization, there are many uncertainty and differences in welfare changes of rural households. So, when analyzing the impact of trade liberalization on household welfare, to endow the rural households with only one identity may lead the analysis result one-sided.Therefore, when conducting such studies, we not only need to analyze from the income and consumption perspectives respectively, but also need to restore multiple identities of residents. Only by comprehensively analyzing the net effect of welfare change can we make an objective evaluation on the welfare effect of trade liberation.Then, how trade liberalization affects the income and expenditure of rural household? According to Bertil Ohlin(1933), as independent accounting units, the income of rural households depends on input factors and factor prices; expenditure depends on the consumption volume and commodity prices. So, under the constant level of factors and consumption, rural households’ welfare depends on factor prices and commodity prices. Thus we can analyze the welfare impact of trade liberalization on rural households based on price effect of trade liberation. From this perspective, the impact of trade liberalization on the welfare of rural households depends primarily on the degree of price transmission. Trade liberalization means substantial reduction of trade distorting measures such as tariffs, quantitative restrictions and export subsidies, etc. The result is domestic market prices changes (including commodity prices and factor prices) followed by the degree changes of price transmission. Secondly, the impact of trade liberalization on the welfare of rural households also depends on the dependence degree of rural households on product prices and factor prices. Households have different income and consumption structures, which make dependence on prices different.Based on the above considerations, started with price transmission, the paper firstly analyses the impact of trade liberalization on income and expenditure; and then analyses the inequality and poverty in rural based on the two dimensions of income and consumption; and finally analyses the net effect of trade liberalization on the welfare of rural households comprehensively.From the perspective of household income, trade openness helps to improve the average income of rural households. But there are differences in the increase rate of income between regions and income groups. Trade liberalization lowered the producer prices and raw material prices, but helped to improve the wages; and there are obvious differences in the magnitude of prices changes and wages changes between industries. By further analysis combined with income structure of household, trade liberalization increased the income of all the households. The income of rural households in the eastern regions rose faster than that in the western region. In a word, trade liberalization is beneficial to the poor.From the perspective of consumption, trade liberalization can reduce the expenditure of rural households, but there are differences among regions or income groups. Preliminary analysis showed that trade liberalization will help to enhance the decline in domestic consumer prices, and there are obvious regional differences. Further analysis, trade liberalization to enhance family life makes all consumption expenditure of rural residents has declined in the eastern region of Household consumption expenditure in rural areas declined more than the western region households, high-income group of rural residents in household consumption expenditure declined more than low-income groups. Overall, the year of trade liberalization is not conducive to the poor of trade liberalization.From the perspective of welfare distribution, trade liberalization increased the degree of inequality in rural areas, worsening the poverty situation in rural areas of consumption, but income poverty alleviation. First, from the income dimension of view, the price effects of trade openness and the existence of differences between products the structure of rural household income differences, trade liberalization increased the income inequality in rural areas, but slowed down the income poverty in rural areas; Then, from the consumer point of view, the price effects of trade openness and the existence of differences between products, household consumption expenditure of rural residents structural differences, trade liberalization increased the inequality of consumption in rural areas, and worsened poverty in rural areas consumption.From the net effect of changes in household welfare, trade liberalization can help to improve the welfare of rural households in net level, but there are also differences among different regions or different income groups. Based on the fact that rural households take dual role of both producers and consumers, Chapter VII defines and deduces the formula of net welfare change of rural households, and then calculates the welfare changes. The results show that trade liberalization helps to improve the net benefits, but there are differences among different regions or different between income groups, such as trade liberalization in 2002 changes in net benefits to rural residents is the impact of trade liberalization beneficial to the poor.In summary, trade liberalization helps to improve the average income of rural households, also helps to reduce the consumption expenditure. Thus it is conducive to increase the net welfare of rural households. However, in the process of trade liberalization, there are differences in the growth of income and decline of consumption expenditure among different regions and different income groups. And this difference increased the degree of inequality in rural areas.Combining this paper’s results with the current situation in the rural areas, we should follow the historical trend; continue to increase trade opening up, but to implement proper policy in the process of trade opening with an effort to address the market failures. |
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