Agriculture Reference
In-Depth Information
additional transfer payment to the inland regions, the total welfare gains
decline from 63.69 and 48.04 billion yuan, respectively, to 63.09 and 47.72
bllon yuan. The reducton n total welfare comes from the much sharper
declne n government utlty n the eastern regon. It could be argued that
government spending in the eastern region has higher returns, therefore
a switch from eastern to inland regions causes efficiency losses. However,
one cannot claim too much just based on this simulation, because the
use of government spending is not specifically modelled and the transfer
payment decson s not governed by an optmsaton process.
Conclusions
Regonal ncome dsparty n Chna has been worsenng snce economc
reforms began. Usng a general equlbrum model of the Chnese economy
with regional details (CERD), this chapter finds that this trend will be
renforced rather than eased by the WTO accesson. The eastern coastal
regon wll have much hgher gans than the nland regons. The two nland
regons wll experence smlar gans wth the western regon beng only
margnally better off than the central regon. It s also found that the
rural-urban inequality will worsen in all regions.
The simulation results are robust to whether the trade balance is fixed
or not as the form of model closure. However, keeping the trade balance
unchanged leads to smaller overall welfare gans and a wder regonal
ncome gap than when the trade balance s made endogenous.
Lowering the tariff cuts in agriculture reduces the total welfare gains,
although it modifies the trend of worsening inequality between rural and
urban households and between regions. Similarly, increasing transfer payments
to the inland regions could marginally improve the regional and rural-urban
inequality at the cost of a smaller overall welfare gain. However, allowing
freer movement of factors and commodtes across regons could mprove the
regional and rural-urban inequality and achieve higher total welfare gains.
Although most of the results derved by the analyss are consstent
with other studies and people's perceptions, one should be cautious in
accepting these results. First, this paper discusses only tariff cuts, rather
than the whole framework of Chna's WTO commtments. The analyss could
be extended to cover other issues, such as non tariff barriers, tariff rate
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