Does the Small-Scale Trade in Border Areas Contribute to Poverty Reduction?

Evidence from China's border areas

Abstract

With the vigorous development of strategies such as the "Belt and Road" Initiative, the Border Areas and Minorities Development Program, and the Western Development Program, China's border trade has flourished. Under the strong leadership of the Communist Party of China and the People's Government, China's poverty alleviation efforts have achieved remarkable results that have attracted worldwide attention, successfully eradicating the absolute poverty that has plagued the Chinese nation for many years. In this context, to investigate the impact of border trade on multidimensional poverty in border areas, this paper constructs a multidimensional poverty index from five dimensions: economy, healthcare, employment, education, and living conditions. A fixed-effects model is employed to empirically examine the impact of border trade on multidimensional poverty in border areas and its underlying mechanisms. The research findings are as follows: (1) Border trade significantly reduces the level of multidimensional poverty in border areas. This conclusion remains valid after conducting a series of robustness tests and using lagged variables as instrumental variables to address endogeneity issues. (2) Mechanism analysis reveals that border trade primarily improves multidimensional poverty through employment promotion effects, infrastructure effects, and fiscal expenditure effects. (3) Heterogeneity analysis shows that the poverty reduction effect of border trade is more pronounced in areas with lower population densities, lower urbanization rates, and in the southwestern and northwestern regions. This paper provides a new perspective for building common prosperity in the new era and offers academic support and policy guidance for further promoting border trade and strengthening friendly regional exchanges.