Welfare Effects of Trade and Factor Market Reforms in China

Masayuki Doi, Piyush Tiwari and Tetsu Kawakami
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Masayuki Doi: Institute of Policy and Planning Sciences, University of Tsukuba, Tsukuba, Ibaraki, Japan
Tetsu Kawakami: Department of Social Sciences, Mie University, Tsu, Mie, Japan

Chapter 14 in Computable General Equilibrium Approaches in Urban and Regional Policy Studies, 2006, pp 297-321 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractBenefits of the multi-faceted liberalization of the Chinese economy can be found in the high rate of economic growth, increased inflow of foreign investment, improved overall quality of life, and some other forms. While the role of trade reform in the Chinese economy received strong attention in the past studies, labor and capital reforms are equally important issues, but were understudied. Inter-industrial wage and capital differentials and restricted labor mobility from rural to urban sector still persist. In this paper, we analyze the economic effects of labor and capital market liberalization on China using a computable general equilibrium (CGE) model. As a signatory to the WTO agreement, China is required to reform its trade sector by eliminating tariffs.We explicitly model wage differentials in Chinese economy, and experiment the effect of removing factor market differentials in the presence and then absence of tariffs and non-tariff barriers. Our results indicate that factor market reforms are essential to the realization of full gains from accession to the WTO agreement.

Keywords: Computable General Equilibrium (CGE) Model; Social Accounting Matrix (SAM); Urban and Regional Policies (or Urban and Regional Policy Evaluation); Each Industry's Market Clearance; Structural and Long-Term Policy Impacts (search for similar items in EconPapers)
JEL-codes: E5 E6 (search for similar items in EconPapers)
Date: 2006
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