Research On The Impact Of China's Foreign Trade On Urban-rural Income Gap

Since the implementation of the reform and opening-up policy in 1978,China's foreign trade has made remarkable achievements with the expansion of coverage both in commodity varieties and geographical ranges.Along with sustained economic growth driven by foreign trade,however,China's income gap,especially the gap between urban and rural areas,is far from optimistic.On the Third Plenary Session of the Eighteenth Central Committee,participants proposed that the majority of farmers should participate in the modernization process and share the fruits of modernization.Therefore,narrowing urban-rural income gap is becoming a practical problem calling for urgent solution.In view of this,this paper attempts to carry out a study on the impact of foreign trade on urban-rural income gap.The H-O Theory is the earliest systematic study on international trade and income gap proposed by Hechscher and Ohlin.Based on this theory,Samuelson and Stolper also proposed the S-S Theorem.This paper,based on previous studies and the dual structure features of China's urban and rural areas,analyzes the major four factors influencing China's urban-rural income gap,namely,commodity price,technical progress,policy formation,and economic growth.This paper will also probe the evolving features of China's foreign trade and urban-rural gap income by carrying out descriptive and statistic analysis: since the implementation of China's reform and opening-up policy in 1978,China's foreign trade grew in a rapid but regionally unbalanced manner as the eastern regions are significantly developing faster than the central and western regions;the income gap between urban and rural areas was first narrowing but then widening and narrowing again.Although it has been declining in recent years,it is still at a high level.When comparing different regions,the urban-rural income gap in the western regions ranks first,the central regions,the second,and the eastern regions,the third.In the empirical study of this paper,the author establishes a panel model dimensioned with national level,the eastern regions,central regions and western regions and by setting degree of dependence on foreign trade as dependent variable while the urban-rural income gap measured by the theil index as independent variable and economic development level,industrial structure,financial expenditure,education level and financial development as controlled variables.The empirical results show that,on the whole,China's foreign trade has intensified the widening of urban-rural income gap and its impact on the three regions declines from the eastern to the western regions,for every 1% increase in the degree of dependence on foreign trade,respectively,the theil index increased by 0.19%,0.18% and 0.04%.To further explore whether the impact of export and import on urban-rural income gap is heterogeneous,this paper also establishes a panel model by setting the degree of dependence on export and import as independent variable,the theil index as independent variables.It is found that for the eastern regions,the positive impact on urban-rural income gap posed by export is stronger than that of import,for every 1% increase in the degree of dependence on export and import,the theil index increased by 0.24% and 0.12%;while for the central regions,foreign trade mainly exacerbates the urban-rural income gap through import,for every 1% increase in the degree of dependence on import,the theil index increased by 0.20%,while export poses little impact when combined with various factors;as for the western regions,export can help to narrow down the urban-rural income gap while import will widen the gap instead,for every 1% increase in the degree of dependence on import,the theil index increased by 0.09%,for every 1% increase in the degree of dependence on export,the theil index decreased by 0.05%.