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Analysis Of The Determinants Of Income And Income Gap Between Urban And Rural China

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  • BIWEI SU

    ()
    (Department of Economics, Sogang University, K526, 35 Baekbeom-ro, Mapo-gu, Seoul 121-742, Korea)

  • ALMAS HESHMATI

    ()
    (Department of Economics, Sogang University, K526, 35 Baekbeom-ro, Mapo-gu, Seoul 121-742, Korea)

Abstract

This paper studies the determinants of income and urban–rural income gap to shed light on the problem of urban–rural income inequality in China. Ordinary least square (OLS), conditional quantile regression and Blinder–Oaxaca decomposition methods are used to analyze four waves of the China Health and Nutrition Survey (CHNS) household data. Results show that education and occupation are essential determinants of households' income level. These two factors exert heterogeneous effects at different percentiles of income distribution. In urban areas, education is more valued for high income earners, while for rural areas, specialized or tertiary education are more beneficial for the poorer households. Among all occupational types, farm activities show much lower returns than other types; and this is more evident for individuals at the left tail of the income distribution. We also find that for the sampled provinces, urban–rural income gap increases from year 2000 to 2004 but the gap decreases from 2004 to 2009. The income gap can be largely explained by the individuals' attributes, especially by the level of education and type of occupation.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal China Economic Policy Review.

Volume (Year): 02 (2013)
Issue (Month): 01 ()
Pages: 1350002-1-1350002-29

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Handle: RePEc:wsi:ceprxx:v:02:y:2013:i:01:p:1350002-1-1350002-29

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Keywords: Urban–rural income gap; Oaxaca–Blinder decomposition; quantile regression; CHNS household data; China; JEL Classification: O15; JEL Classification: O18; JEL Classification: D31; JEL Classification: D63; JEL Classification: C31;

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