Abstract
A computable general equilibrium model is constructed to evaluate the impact of trade liberalization in China, which has expressed recently the intention to join the GATT in 1995. The innovative feature of our model is incorporation of rural surplus labour, a distinct feature of the Chinese economy, because 60 percent of the labour force is still engaged in agriculture. To highlight the role played by rural surplus labor, we deliberately keep the model small and simple. Our results indicate that a 50 percent across-the-board cut in import tariffs may improve efficiency by about eight percent, half of which is due to absorption of rural surplus labour.
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