Impact of China’s WTO Accession on Rural-Urban Income Inequality

Many fear China’s accession to WTO will impoverish its rural people, via greater import competition in its agricultural markets. We explore that possibility in two ways. First, we draw on standard Ricardo-Viner general equilibrium theory and adapt it to China’s institutional circumstances to show that rural incomes need not fall and the rural–urban income gap may even be reduced. Those outcomes are possible, even if prices of some (land-intensive) farm products fall, because other (labour-intensive) farm products will become more exportable and the easing of restrictions on exports of textiles and clothing will boost town and village enterprises outside urban centres. Second, we plan to draw on new estimates of the likely changes in agricultural prices as a result of WTO accession to examine the above possibility empirically using the global, economy-wide numerical simulation model known as GTAP