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Globalization and Inequality: Evidence from within China

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Author Info
Wei, Shang-Jin
Wu, Yi

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Abstract

In this Paper, we provide a case study of the impact of globalization on income inequality using data across Chinese regions. The literature on cross-country studies has been criticized because differences in legal systems and other institutions across countries are difficult to control for, and the inequality data across countries may not be compatible. An in-depth case study of a particular country’s experience can provide a useful complement to cross-country regressions. We construct a measure of urban-rural income ratio for 100 or so Chinese cities (urban areas and adjacent rural counties) over the period 1988-93. The central finding is that cities that experience a greater degree of openness in trade also tend to demonstrate a greater decline in urban-rural income inequality. Thus, globalization has helped to reduce, rather than increase, the urban-rural income inequality. This pattern in the data suggests that inferences based solely on China's national aggregate figures (overall openness and overall inequality) can be misleading. The negative association between openness and inequality holds up when we apply a geography-based instrumental variable approach to correct for possible endogeneity of a region's trade openness.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3088.

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Date of creation: Dec 2001
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Handle: RePEc:cpr:ceprdp:3088

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Keywords: china globalization inequality

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General

References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yang, Ling & Lahr, Michael/L, 2008. "Interregiona;Decomposition of labor productivity differences in China, 1987-1997," MPRA Paper 8313, University Library of Munich, Germany. [Downloadable!]
  2. Francesc Obiols-Homs, 2002. "Trade Effects on the Personal Distribution of Wealth," Working Papers 0208, Centro de Investigacion Economica, ITAM. [Downloadable!]
  3. Reuter & Ulrich, 2004. "The Effects of Intraregional Disparities on Regional Development in China: Inequality Decomposition and Panel-Data Analysis," Econometric Society 2004 Far Eastern Meetings 716, Econometric Society. [Downloadable!]
  4. James K. Galbraith & Ludmila Krytynskaia & Qifei Wang, 2004. "The Experience of Rising Inequality in Russia and China during the Transition," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 1(1), pages 87-106, June. [Downloadable!]
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  6. Fu, Feng-Cheng & Vijverberg, Chu-Ping C. & Vijverberg, Wim P. M., 2004. "Public Infrastructure as a Determinant of Intertemporal and Interregional Productive Performance in China," IZA Discussion Papers 1019, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Loren Brandt & Carsten Holz, 2005. "Spatial Price Differences in China: Estimates and Implications," Microeconomics 0512001, EconWPA. [Downloadable!]
    Other versions:
  8. Jomo K.S., 2006. "Growth with Equity in East Asia?," Working Papers 33, United Nations, Department of Economics and Social Affairs. [Downloadable!]
  9. Roy Bahl & Jorge Martinez-Vazquez, 2003. "Fiscal Federalism and Economic Reform in China," International Studies Program Working Paper Series, at AYSPS, GSU paper0313, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
  10. Changkyu Choi, 2006. "Does foreign direct investment affect domestic income inequality?," Applied Economics Letters, Taylor and Francis Journals, vol. 13(12), pages 811-814, October. [Downloadable!] (restricted)
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