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The trend of the Gini coefficient of China

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  • Jiandong Chen
  • Dai Dai
  • Ming Pu
  • Wenxuan Hou
  • Qiaobin Feng

Abstract

A literature review indicates that the main problem in calculating the Gini coefficient of Chinese residents’ income is the shortcomings of the data sources. Though many studies have tried to overcome these limitations through decomposing the nationwide Gini ratio by urban and rural areas, the final results have been underestimated, due to the overlap term or residual in the decomposition. This paper analyses the effects of the overlap term on calculating the overall Gini coefficient through a statistical approach, and estimates Chinese Gini ratios since economic reform and open door policies were adopted. Based on decomposing the Chinese Gini coefficient from 1978 to 2006, the authors find that the key factor of income inequality comes from income disparity between rural and urban inhabitants. The authors investigate the features of this income inequality between rural and urban areas. Furthermore, statistical approaches are employed to evaluate the effects of the development of urbanisation and rural-to-urban average income on the income inequality of the whole nation. The results show that accelerating the pace of urbanisation is the key issue to improving Chinese income disparity. On the basis of the above analysis, the paper proposes related policies for policy-makers.

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Paper provided by BWPI, The University of Manchester in its series Brooks World Poverty Institute Working Paper Series with number 10910.

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Date of creation: 2010
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Handle: RePEc:bwp:bwppap:10910

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  1. Peter J. Lambert & André Decoster, 2005. "The Gini Coefficient Reveals More," Center for Economic Studies - Discussion papers ces0508, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  2. Lambert, Peter J & Aronson, J Richard, 1993. "Inequality Decomposition Analysis and the Gini Coefficient Revisited," Economic Journal, Royal Economic Society, vol. 103(420), pages 1221-27, September.
  3. Anthony Shorrocks & Guanghua Wan, 2005. "Spatial decomposition of inequality," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 59-81, January.
  4. Wataru Souma, 2000. "Universal Structure of the Personal Income Distribution," Papers cond-mat/0011373, arXiv.org.
  5. Hajo Holzmann & Sebastian Vollmer & Julian Weisbrod, 2007. "Income Distribution Dynamics and Pro-Poor Growth in the World from 1970 to 2003," Ibero America Institute for Econ. Research (IAI) Discussion Papers 161, Ibero-America Institute for Economic Research.
  6. Dennis Tao Yang, 1999. "Urban-Biased Policies and Rising Income Inequality in China," American Economic Review, American Economic Association, vol. 89(2), pages 306-310, May.
  7. Pyatt, Graham, 1976. "On the Interpretation and Disaggregation of Gini Coefficients," Economic Journal, Royal Economic Society, vol. 86(342), pages 243-55, June.
  8. Branko Milanovic, 2002. "True World Income Distribution, 1988 and 1993: First Calculation Based on Household Surveys Alone," Economic Journal, Royal Economic Society, vol. 112(476), pages 51-92, January.
  9. Fang, Cheng & Zhang, Xiaobo & Fan, Shenggen, 2002. "Emergence of urban poverty and inequality in China: evidence from household survey," China Economic Review, Elsevier, vol. 13(4), pages 430-443, December.
  10. Gibson, John & Huang, Jikun & Rozelle, Scott, 2001. "Why is income inequality so low in China compared to other countries?: The effect of household survey methods," Economics Letters, Elsevier, vol. 71(3), pages 329-333, June.
  11. Deaton, A.S., 1993. "Data and Econometric Tools for Development Analysis," Papers 172, Princeton, Woodrow Wilson School - Development Studies.
  12. Lopez, Humberto & Serven, Luis, 2006. "A normal relationship ? Poverty, growth, and inequality," Policy Research Working Paper Series 3814, The World Bank.
  13. Shujie Yao, 1997. "Decomposition of Gini coefficients by income factors: a new approach and application," Applied Economics Letters, Taylor & Francis Journals, vol. 4(1), pages 27-31.
  14. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November.
  15. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December.
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Cited by:
  1. Noland, Marcus & Son, Hyun H., 2012. "Editors’ introduction transitional economies: Progress and pitfalls," Journal of Asian Economics, Elsevier, vol. 23(2), pages 107-110.
  2. Zhilin Tang, 2014. "They Are Richer But Are They Happier? Subjective Well-Being of Chinese Citizens Across the Reform Era," Social Indicators Research, Springer, vol. 117(1), pages 145-164, May.
  3. Gu, Xinhua & Tam, Pui Sun, 2013. "The saving–growth–inequality triangle in China," Economic Modelling, Elsevier, vol. 33(C), pages 850-857.
  4. Xiaobing Wang & Jenifer Piesse & Nick Weaver, 2011. "Mind the gaps: a political economy of the multiple dimensions of China’s rural–urban divide," Brooks World Poverty Institute Working Paper Series 15211, BWPI, The University of Manchester.

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