TY - JOUR

T1 - Tariff liberalisation, price transmission and rural welfare in China

AU - Zhu, Jing

AU - Yu, Wusheng

AU - Wang, Junying

AU - Elleby, Christian

PY - 2016

Y1 - 2016

N2 - China's tariff liberalisation as part of its WTO accession application and eventual agreement has been thoroughly analysed in the literature. However, much of this literature is based on forward-looking ex-ante analyses and few studies provide empirical evidence on its actual impact. We fill in this gap by evaluating empirically the welfare effects of China's actual tariff liberalisation on Chinese farmers during the 1997–2010 period. By estimating the domestic market price effects of China's tariff liberalisation and the associated wage earning effects, we find that on average Chinese farmers were able to gain more from reduced consumption prices than they would lose from reduced agricultural and wage income due to tariff liberalisation. Welfare gains over time are estimated to be positively correlated with the actual degrees of tariff liberalisation, implying that relatively more gains were realized immediately before and after China's WTO accession in 2001, as compared to the more recent period when relatively little liberalisation was carried out. Farmers’ rising non-agricultural income and increasing consumption shares of non-agricultural products are important determinants of these positive average welfare effects. Moreover, welfare gains from tariff liberalisation are shown to be distributed unevenly across Chinese provinces and income levels, with farmers located in coastal provinces and at higher income levels gaining more than their counterparts in remote provinces and at lower income levels.

AB - China's tariff liberalisation as part of its WTO accession application and eventual agreement has been thoroughly analysed in the literature. However, much of this literature is based on forward-looking ex-ante analyses and few studies provide empirical evidence on its actual impact. We fill in this gap by evaluating empirically the welfare effects of China's actual tariff liberalisation on Chinese farmers during the 1997–2010 period. By estimating the domestic market price effects of China's tariff liberalisation and the associated wage earning effects, we find that on average Chinese farmers were able to gain more from reduced consumption prices than they would lose from reduced agricultural and wage income due to tariff liberalisation. Welfare gains over time are estimated to be positively correlated with the actual degrees of tariff liberalisation, implying that relatively more gains were realized immediately before and after China's WTO accession in 2001, as compared to the more recent period when relatively little liberalisation was carried out. Farmers’ rising non-agricultural income and increasing consumption shares of non-agricultural products are important determinants of these positive average welfare effects. Moreover, welfare gains from tariff liberalisation are shown to be distributed unevenly across Chinese provinces and income levels, with farmers located in coastal provinces and at higher income levels gaining more than their counterparts in remote provinces and at lower income levels.

U2 - 10.1111/1477-9552.12115

DO - 10.1111/1477-9552.12115

M3 - Journal article

VL - 67

SP - 24

EP - 46

JO - Journal of Agricultural Economics

JF - Journal of Agricultural Economics

SN - 0021-857X

IS - 1

ER -