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The Urban-Rural Income Gap And Inequality In China

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Author Info
Terry Sicular
Yue Ximing
Björn Gustafsson
Li Shi

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Abstract

Using new household survey data for 1995 and 2002, we investigate the size of China's urban-rural income gap, the gap's contribution to overall inequality in China, and the factors underlying the gap. Our analysis improves on past estimates by using a fuller measure of income, adjusting for spatial price differences and including migrants. Our methods include inequality decomposition by population subgroup and the Oaxaca-Blinder decomposition. Several key findings emerge. First, the adjustments substantially reduce China's urban-rural income gap and its contribution to inequality. Nevertheless, the gap remains large and has increased somewhat over time. Second, after controlling for household characteristics, location of residence remains the most important factor underlying the urban-rural income gap. The only household characteristic that contributes substantially to the gap is education. Differences in the endowments of, and returns to, other household characteristics such as family size and composition, landholdings, and Communist Party membership are relatively unimportant. Copyright © 2007 The Authors; Journal compilation © International Association for Research in Income and Wealth 2007.

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Article provided by Blackwell Publishing in its journal Review of Income and Wealth.

Volume (Year): 53 (2007)
Issue (Month): 1 (03)
Pages: 93-126
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Handle: RePEc:bla:revinw:v:53:y:2007:i:1:p:93-126

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  1. David E. Sahn & David C. Stifel, 2003. "Urban--Rural Inequality in Living Standards in Africa," Journal of African Economies, Oxford University Press, vol. 12(4), pages 564-597, December.
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  2. X. B. Zhao, S. P. Tong, 2000. "Unequal Economic Development in China: Spatial Disparities and Regional Policy Reconsideration, 1985-1995," Regional Studies, Taylor and Francis Journals, vol. 34(6), pages 549-561, August. [Downloadable!] (restricted)
  3. Fan, Shenggen & Zhang, Linxiu & Zhang, Xiaobo, 2004. "Reforms, Investment, and Poverty in Rural China," Economic Development and Cultural Change, University of Chicago Press, vol. 52(2), pages 395-421, January.
  4. Yang, Dennis T. & Hao Zhou, 1997. "Rural-Urban Disparity and Sectoral Labor Allocation in China," Working Papers 97-02, Duke University, Department of Economics.
  5. Loren Brandt & Carsten Holz, 2005. "Spatial Price Differences in China: Estimates and Implications," Microeconomics 0512001, EconWPA. [Downloadable!]
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  6. Anthony Shorrocks & Guanghua Wan, 2005. "Spatial decomposition of inequality," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 59-81, January. [Downloadable!] (restricted)
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  7. Carlos Gradín & Olga Cantó & Coral del Río, 2008. "Inequality, poverty and mobility: Choosing income or consumption as welfare indicators," Investigaciones Economicas, Fundación SEPI, vol. 32(2), pages 169-200, May. [Downloadable!]
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  8. Kanbur, Ravi & Zhang, Xiaobo, 1999. "Which Regional Inequality? The Evolution of Rural-Urban and Inland-Coastal Inequality in China from 1983 to 1995," Journal of Comparative Economics, Elsevier, vol. 27(4), pages 686-701, December. [Downloadable!] (restricted)
  9. Zhang, Xiaobo & Fan, Shenggen, 2004. "Public investment and regional inequality in rural China," Agricultural Economics, Blackwell, vol. 30(2), pages 89-100, March. [Downloadable!] (restricted)
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  10. Morduch, Jonathan & Sicular, Terry, 2000. "Politics, growth, and inequality in rural China: does it pay to join the Party?," Journal of Public Economics, Elsevier, vol. 77(3), pages 331-356, September. [Downloadable!] (restricted)
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  11. Zhang, Xiaobo & Kanbur, Ravi, 2005. "Spatial inequality in education and health care in China," China Economic Review, Elsevier, vol. 16(2), pages 189-204. [Downloadable!] (restricted)
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  12. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November. [Downloadable!] (restricted)
  13. Ravallion, Martin & Shaohua Chen, 2004. "China's (uneven) progress against poverty," Policy Research Working Paper Series 3408, The World Bank. [Downloadable!]
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  14. Jalan, Jyotsna & Ravallion, Martin, 1998. "Transient Poverty in Postreform Rural China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 338-357, June. [Downloadable!] (restricted)
  15. Miles, David, 1997. "A Household Level Study of the Determinants of Incomes and Consumption," Economic Journal, Royal Economic Society, vol. 107(440), pages 1-25, January. [Downloadable!] (restricted)
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  1. Van de Poel, E & O'Donnell, O & van Doorslaer, E, 2008. "Urbanization and the spread of diseases of affluence in China," Health, Econometrics and Data Group (HEDG) Working Papers 08/25, HEDG, c/o Department of Economics, University of York. [Downloadable!]
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  2. Katsushi S. Imai & Xiaobing Wang & Woojin Kang, 2009. "Poverty and Vulnerability in Rural China: Effects of Taxation," The School of Economics Discussion Paper Series 0913, Economics, The University of Manchester. [Downloadable!]
  3. John Whalley & Ximing Yue, 2006. "Rural Income Volatility and Inequality in China," NBER Working Papers 12779, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Jacek Kochanowicz & Joanna Rymaszewska & Joanna Tyrowicz, 2008. "Intra-Provincial Inequalities and Economic Growth in China," Working Papers 2008-10, Faculty of Economic Sciences, University of Warsaw. [Downloadable!]
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  5. Jikun Huang & Yu Liu & Will Martin & Scott Rozelle, 2008. "Agricultural Trade Reform and Rural Prosperity: Lessons from China," NBER Working Papers 13958, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Stefan Gravemeyer & Thomas Gries & Jinjun Xue, 2008. "Discrimination, Income Determination and Inequality – The case of Shenzhen," Working Papers 16, University of Paderborn, CIE Center for International Economics. [Downloadable!]
  7. Zhai, Fan & Hertel, Thomas, 2009. "Economic and Poverty Impacts of Agricultural, Trade and Factor Market Reforms in China," Agricultural Distortions Working Paper 52787, World Bank. [Downloadable!]
  8. Li, Shi & Zhao, Renwei, 2007. "Changes in the Distribution of Wealth in China 1995-2002," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  9. Luo, Xubei & Zhu, Nong, 2008. "Rising income inequality in China : a race to the top," Policy Research Working Paper Series 4700, The World Bank. [Downloadable!]
  10. Saccone Donatella, 2008. "Educational inequality and educational poverty. The chinese case in the period 1975-2004," Department of Economics Working Papers 200808, University of Turin. [Downloadable!]
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