Original scientific paper
https://doi.org/10.1080/1331677X.2022.2142256
Trade liberalisation, imperfect pass-through and cost of living: evidence from Chinese cities
Hongzhan Tao
Tao Song
Abstract
This article investigates the consumption effect of trade liberalisation
through changes in the cost of living in Chinese cities. We use
fixed effects model and dynamic panel model based on household
survey data from 2002 to 2009. We identify the imperfect passthrough
mechanism of tariffs and non-tariff measures at city level.
The main findings show that the aggregate cost of living in
Chinese cities is an inverted-V trend. Tariffs reduction and the high
incidence of non-tariff measures can decrease cost of living in
Chinese cities, which improves the overall consumption welfare and
narrows down the regional disparities. The consumption effects are
heterogenous due to the diverse spatial effects, demand effects
and competition effects across Chinese cities. Cities with a high
expenditure share of manufactured goods have a larger effect on
the reduction of cost of living. Tariffs have a larger marginal effect
in small cities and cities with high level of privatisation. While the
incidence of non-tariff measures has a larger marginal effect in
small cities and cities with low level of privatisation.
Keywords
Trade liberalisation; cost of living; imperfect pass-through; consumption effect
Hrčak ID:
306719
URI
Publication date:
30.4.2023.
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