Welfare Effects of Regressive Taxation and Subsidies in China
AbstractUsing three comparable national representative household surveys for China in 1988, 1995 and 2002, this paper provides micro level evidence of a policy of absolute regressive taxation and an inverted welfare system. It reviews the economic effects of taxes and subsides and shows that a dual and regressive taxation system increases the urban rural income gap and enhances overall inequality. The empirical evidence indicates that the relatively poorer rural population pay net tax while those in the richer urban areas receive net subsidies. This biased system of taxes and welfare payments is one of the major causes of the persisting urban-rural income gap and is largely responsible for overall income inequality in China.
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Bibliographic InfoPaper provided by BWPI, The University of Manchester in its series Brooks World Poverty Institute Working Paper Series with number 10809.
Date of creation: 2009
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-02-05 (Accounting & Auditing)
- NEP-ALL-2010-02-05 (All new papers)
- NEP-CNA-2010-02-05 (China)
- NEP-DEV-2010-02-05 (Development)
- NEP-LAW-2010-02-05 (Law & Economics)
- NEP-PBE-2010-02-05 (Public Economics)
- NEP-TRA-2010-02-05 (Transition Economics)
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