Trade policy impacts under alternative land market regimes in rural China

In this paper we apply a simulation model of a village economy in Guizhou province, China, to assess impacts of trade reform at the household and the village level under alternative land market regimes. Putting special emphasis on the modeling of household migration a trade reform scenario is simulated with and without the existence of a land rental market in the village.Significant impacts of the land market on the policy outcome regarding household production, income and welfare are found. The possibility to trade land within the village leads to increasing specialization into agriculture and migration among the households as a response to the policy shock. In a situation with a land market, incomes of households which expand agricultural production are less negatively affected by trade reform than incomes of households which migration more.At the village level, a land market does not influence the poverty outcome of the reform but reduces its inequality enhancing impact. Village migration and exports of agricultural outputs increase.

► A village CGE model is applied to assess trade policy impacts under different land market regimes. ► The existence of a perfect land market leads to higher specialization in farming and migration. ► With a land market, households which expand farming are less negatively affected by reform. ► A land market does not affect poverty outcomes of reform but reduces inequality enhancing impacts. ► Village level outcomes of trade reforms are contingent on the land market regime.