Comparative advantage of food exports, rural-urban income disparity and agricultural employment: Empirical evidence from China

Yu Hong, Zhen Song, Jiayue Wan

Abstract

This study assumes that 1) the agricultural employment is interactively associated with the rural-urban income disparity; and 2) the changing comparative advantage of the Chinese food exports has influences upon the income of rural residents and therefore upon the size of the agricultural employment. Using yearly data of 1984-2011, we employ vector error correction models to empirically examine the short-run and long-run Granger causal relations among the Chinese agricultural employment, rural-urban income ratio and the comparative advantage of food exports. We find that 1) rural-urban income ratio Granger causes the agricultural employment in both short-run and long-run with positive effects; 2) the agricultural employment has negative short-run and long-run effects on the rural-urban income ratio; and 3) the Chinese comparative advantage of food exports has significantly positive effect on the rural-urban income ratio, but the long-run effect is negative. We argue that although the food export facilitation can increase the rural income in short-run, the policies adversely hurt the rural-urban income equality in long-run.