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Income inequality in China 1952–2017: persistence and main determinants

Author

Listed:
  • Marinko Skare

    (Juraj Dobrila University of Pula, Croatia)

  • Luis A. Gil-Alana

    (University of Navarra, Spain ; Universidad Francisco de Vitoria, Spain)

  • Gloria Claudio-Quiroga

    (Universidad Francisco de Vitoria, Spain)

  • Romina Pržiklas Družeta

    (Juraj Dobrila University of Pula, Croatia)

Abstract

Research background: China's economic growth, however remarkable, is due to the Harrod-Domar nature of economic growth and, therefore, limited. The main limitation lies in the extension of the neoclassical growth model and the government need to decrease regional disparities using new migration, urbanization and social policy. Purpose of the article: It is the rising regional disparity in the total factor productivity to cause the income inequality increase (measured by GINI index) in China from 1952–2017. Our paper brings new insight into the main inequality determinants and causes in China, using a fractional integration modeling framework. Methods: Using fractional integration, we find total factor productivity (TFP), real gross domestic product per capita and growth and expenditures for the social safety net and employment effort to have a statistically significant impact on GINI. Income inequality in China is of a persistent nature with the effects of the shocks affecting the GINI index enduring over time. Findings & value added: The results of this study highlight the importance for model/policy changes by the policy makers and practitioners in China to deal with the inequality issue. This involves improving the growth model through innovation and technological advancement, relaxing TFP dependence on the physical inputs (labor and capital) to reduce income inequality.

Suggested Citation

  • Marinko Skare & Luis A. Gil-Alana & Gloria Claudio-Quiroga & Romina Pržiklas Družeta, 2021. "Income inequality in China 1952–2017: persistence and main determinants," Oeconomia Copernicana, Institute of Economic Research, vol. 12(4), pages 863-888, December.
    • Handle: RePEc:pes:ieroec:v:12:y:2021:i:4:p:863-888
    DOI: 10.24136/oc.2021.028
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    More about this item

    Keywords

    China; income inequality; fractional integration; persistence; economic growth;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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