Opening of China's Trade, Labour Market Reform and Impact on Rural Wages

Colin Carter and Andrew J. Estrin

The World Economy, 2005, vol. 28, issue 6, 823-839

Abstract: Government policy in China supports urban wages at the expense of returns to farm labour. A model is developed to estimate how WTO accession and complementary labour market reform will influence factor returns in China. With WTO membership, a larger cut in manufacturing tariffs compared to agriculture will improve agriculture's terms of trade and will raise the agricultural wage. Complementary labour market reforms will further boost farm wages as labour exits agriculture in large numbers. We estimate that WTO membership and complementary labour market reforms will result in a decline in the agricultural labour force by about 25 per cent.

Date: 2005
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