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Does grassroots democracy reduce income inequality in China?

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  • Shen, Yan
  • Yao, Yang
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    Abstract

    Using village and household survey data collected from 48 villages of eight Chinese provinces for the period 1986-2002, this paper studies how the introduction of village elections affects income distribution at the village level. We estimate both a static fixed-effect panel model and a dynamic panel model for the within-village Gini coefficient and take care of the endogeneity of the introduction of elections. The dynamic panel model shows that having elections reduces the Gini coefficient by 0.04, or 14.3% of the sample average. We also find that elections tend to increase the income shares of poorer portions of the population. Further econometric analysis based on dynamic panel models shows that elections increase per-capita public expenditures by 271 Yuan, but do not increase the level or progressiveness of net or total income transfer in a village. Therefore, elections' positive role in reducing income inequality is not played through more income redistribution, but through more pro-poor public investment.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 92 (2008)
    Issue (Month): 10-11 (October)
    Pages: 2182-2198

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    Handle: RePEc:eee:pubeco:v:92:y:2008:i:10-11:p:2182-2198

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    Web page: http://www.elsevier.com/locate/inca/505578

    Related research

    Keywords: Grassroots democracy Income distribution Dynamic panel model;

    References

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    Cited by:
    1. Monica Martinez-Bravo & Gerard Padró i Miquel & Nancy Qian & Yang Yao, 2011. "Do Local Elections in Non-Democracies Increase Accountability? Evidence from Rural China," NBER Working Papers 16948, National Bureau of Economic Research, Inc.
    2. Li Han, 2014. "Are elections in autocracies a curse for incumbents? Evidence from Chinese villages," Public Choice, Springer, vol. 158(1), pages 221-242, January.
    3. Mu, Ren & Zhang, Xiaobo, 2011. "The role of elected and appointed village leaders in the allocation of public resources: Evidence from a low-income region in China," IFPRI discussion papers 1061, International Food Policy Research Institute (IFPRI).
    4. James Alm & Yongzheng Liu, 2014. "China's Tax-for-Fee Reform and Village Inequality," Oxford Development Studies, Taylor & Francis Journals, vol. 42(1), pages 38-64, March.
    5. Steef Baeten & Tom Van Ourti & Eddy Van Doorslaer, 2012. "Rising Inequalities in Income and Health in China: Who is left behind?," Tinbergen Institute Discussion Papers 12-091/V, Tinbergen Institute.
    6. Mu, Ren & Zhang, Xiaobo, 2014. "Do elected leaders in a limited democracy have real power? Evidence from rural China," Journal of Development Economics, Elsevier, vol. 107(C), pages 17-27.
    7. Chen, Xi & Zhang, Xiaobo, 2009. "The Distribution of Income and Well-Being in Rural China: A Survey of Panel Data Sets, Studies and New Directions," MPRA Paper 20587, University Library of Munich, Germany.
    8. Tao, Ran & Su, Fubing & Sun, Xin & Lu, Xi, 2011. "Political trust as rational belief: Evidence from Chinese village elections," Journal of Comparative Economics, Elsevier, vol. 39(1), pages 108-121, March.
    9. Shun Wang, 2010. "Social Capital, Local Government, and the Management of Irrigation Systems in Northwest China," EEPSEA Research Report rr2010122, Economy and Environment Program for Southeast Asia (EEPSEA), revised Dec 2010.

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