Empirical Analysis Of Chinese Farmers' Income And Agricultural Intra-industry Trade Relations

With China becoming the number of World Trade Organization, Chinese foreign trade goes further in the way of trade liberalization. There many empirical works addressed the relationship of trade liberalization and income and the positive relationship between trade and income was found. However, this relationship is reverse causation-income affecting trade openness, which can bias the estimated effects of trade on income. But it may also have adversely affected worker in industries that experienced an increase in competition from goods produced abroad. With the slashing reforming towards liberalizing trade in the last two decades, did it harm for the income of Chinese fanners? Recently, the international trade of agricultural products between China and other countries is intra-industry trade in character. Some of Chinese economists have argued one of the steps towards openness-trade liberalization- harms poorer actors in the economy or leaves some people behind in poverty. This paper takes this concern by examining the evidence about whether trade liberalization has increased the income of Chinese farmer or reduced their income. However, within our current knowledge of trade of agricultural produce, there is no work to take into account the intra-industry trade in discussing the relationship between the income and trade openness. In this paper, we take this stylized fact as given and argue that it is appropriate to look at the question of trade and income of farmers in the context of error correction model. In this paper we build up ECM including two variables: income of fanner and Grubel-Lloyd index of intra-industry trade to discuss this problem. According to the estimated long equilibrium, it is found that intra-industry trade can help farmers to increase the income.