The Effects Of Trade Liberalization On Area Income Gap

Trade liberalization is a dynamic process in opening economy, which has the characteristic of neutralization and the weakening of government intervene. The effects of trade liberalization on income gap were always concerned in the academia, and disputed. While absorbing the traditional theories critically, this article integrated new theories into the analysis on the effects of trade on income gap, and attempted to reduce the research object in the effects of trade on income gap to area. Then, this article studied the effects of trade liberalization on area income gap that based on the exceptional featured trade model in Zhejiang province. Accordingly, we could bring forward some recommendations more pertinent.According to Heckscher-Ohlin model and Stolper- Samuelson theorem, the payment of the factors which are intensively used will increase in the expanded industries due to trade opening, while the payment of the factors will decrease in the contracted industries. Thus the income gap increases. This article analyses the contradiction between the theoretical basis and prerequisite hypothesis of traditional trade theory concluded that traditional trade theory concluding that traditional trade theory is not suit to this article. But the new theories consider the factors distribution in opening economy and exogeneity growth due to technology development, which match the actual situation of Zhejiang trade development, and constitute the theory basis of this article.This article defines the index of trade liberalization and income gap at first. Foreign trade dependencies measure the degree of trade liberalization and Theil index measure income gap in Zhejiang area. On the foundation of the research on trade development model, the process of trade development and the operation of Zhejiang foreign trade to economy,industry,technology and so on, according to foreign trade amount in recent years Zhejiang areas and foreign trade dependency, we divide Zhejiang province into three areas, study the tendency of the three areas' trade and income gap, and the effects of trade to area income gap. We consider Zhejiang area as our objects, and use the econometric tool to analyze the area income gap effects by trade liberalization. The result indicates that trade liberalization is the granger reason of Zhejiang area income gap.Then, based on the theory and empirical analysis, this article focuses on the transmission mechanism and transmission process on the effects of trade liberalization to income gap. We study transmission mechanism from four factors: economy development, industry structure, technology and competition.Finally, the article gives policy suggestions based on four aspects concerning the improvement of trade structure, the development of industrial cluster, the technology upgrade, and the role of government.