Notice of Retraction: Trade openness, domestic terms of trade, and rural residents' consumption structure in China: A viewpoint from farmers' welfare in open economy

Abstract

After China's accession to the WTO, many of its domestic markets have been gradually opened to the outside world and the openness of agricultural market is evitable. Concerns are also escalated on the welfare of agricultural producers, as the price will be changed greatly with the increasing speed of openness in agricultural sector. However, the welfare of agricultural producers is not only related to agricultural products, also influenced by industrial products prices. And under the circumstance of overall trade openness, both of agricultural and industrial products will be affected by world price transmission. Thus, it is questionable to measure the impact of trade openness on farmers' welfare just from the aspect of the price shock in agricultural products. In this paper, we choose relative price of domestic agricultural to industrial products as the starting point, and treat farmers' consumption structure as the indicator of their welfare. Using data from 1978–2007, we establish simultaneous equations to analyze the relationship among trade openness, relative price of domestic agricultural and industrial products and consumption structure empirically. The results show although the openness of agricultural market will change domestic price dramatically, overall trade openness still has positive impact on the relative price of the agricultural to industrial products, which is favorable of farmers' welfare improvement through changing farmers' consumption structure for more industrial products. It could be concluded that overall trade openness is benefit for farmers' welfare improvement judging from the aspect of relative trade term of agricultural and industrial products.